A Look at Financial Help and Incentives for First-Time Homebuyers

Despite recent softening in the housing market, home ownership in Canada is expensive and can be intimidating if you’re a first-timer. Luckily, there’s financial help and incentives for first-time homebuyers, which can help offset the cost of purchasing a new home. You don’t need to feel as if you have to do it all alone – read below to see what incentives are available.

Incentives for First-Time Homebuyers

Home Buyers’ Plan (HBP)

The Home Buyers’ Plan (HBP) offers an alternative way of securing funds for a down payment for first-time homebuyers. If you have a Registered Retirement Savings Plan (RRSP), you may withdraw up to $60,000 from the account to buy or build a qualifying home for yourself or a related person with a disability. You then have a 15-year period to replace the funds in your RRSP.

You can withdraw funds from more than one RRSP as long as you are the owner of each account. However, some RRSPs, such as locked-in accounts or group RRSPs, do not allow you to withdraw funds, so you need to check to make sure that your RRSP is eligible.

For the purpose of the HBP, you are considered a first-time homebuyer if you did not occupy a home that you have owned within the last four years. This means that if you have previously owned a home, you may still be considered a first-time homebuyer and can take advantage of the HBP a second time as long as the balance has been paid as of January 1 of that year and you meet all other requirements.

First Home Savings Account

The FHSA combines the elements of a Tax-Free Savings Account (TFSA) and a Registered Retirement Savings Plan (RRSP), providing Canadian residents the benefit of tax-free withdrawals and tax-deductible contributions. However, the money can only be withdrawn tax-free when purchasing a home. The annual contribution maximum is $8,000, and contributors can carry forward any unused portion. So, if you open an FHSA and deposit $4,000 in 2024, your contribution room and carry-over amount for 2025 will be $12,000. The lifetime contribution limit is $40,000.

Tax Credits for Homebuyers

While a couple of incentives are available before you purchase your first home, the help doesn’t stop there. The government of Canada also has several tax credits and rebates available for first-time homebuyers. A tax professional can work with you to see how much you are eligible to get back in the following tax season when you submit your tax return.

Home Buyers’ Amount – This tax credit becomes accessible to first-time homebuyers the following year when they file their tax return and is meant to help offset some of the upfront costs associated with buying a house for the first time. You can claim up to $10,000 for purchasing a qualifying home, as long as it is your first time buying one.

GST/HST Housing Rebates – The sales of new homes are generally subject to GST/HST, and these tax rebates help to offset some of the tax you paid on your home. 

Moving Expenses – If you bought your first home in a new location to work, run a business, or study as a full-time student in a post-secondary institution, some of these costs can be refunded. You can deduct eligible moving expenses from the income you earn in the new location in that tax year. Your new home must be at least 40 kilometres closer to your work or school location to qualify.

If you want to enter the housing market but are hesitant due to the price, consider the financial help and incentives available for first-time homebuyers. One of them could be the boost you need to get you into your first home.