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First-Time Home Buyers Incentive: Hidden Benefits You Didn’t Know About [2025 Guide]

12 Mins   Canadian first-time home buyers can get up to $40,000 in tax-free savings through the FHSA and withdraw $60,000 from their RRSP without tax penalties[-5]. Financial hurdles exist when buying your first home in Canada. These government programs help reduce your upfront costs and make homeownership possible sooner.   Many powerful benefits exist beyond the simple incentives. To cite an instance, first-time buyers now qualify for a 30-year amortization on insured mortgages instead of the standard 25 years. This change could lower your monthly payments. Provincial rebates can save you up to $8,000 in British Columbia, $4,000 in Ontario, and $2,000 in PEI on land transfer taxes. Smart combination of these programs creates substantial financial advantages that most prospective homeowners miss. This piece covers everything about first-time home buyer programs in Canada for 2025. You’ll learn about qualification requirements, ways to combine multiple incentives, and hidden benefits that could save you thousands more on your first home purchase. Who qualifies as a first-time home buyer in Canada? Image Source: Mortgage Sandbox The definition of a first-time home buyer in Canada can be tricky because programs have different rules. This difference is significant since it affects your chance to save thousands of dollars. Definition under different programs (FHSA, HBP, LTT) Most federal first-time buyer programs use the four-year rule as their foundation, but each program applies this rule in its own way: The First Home Savings Account (FHSA) lets you qualify if you haven’t owned a principal residence in the current calendar year before opening the account or in the previous four calendar years. This rule applies to you and your spouse or common-law partner. The FHSA withdrawal rules are specific – you and your spouse must not have lived in a qualifying home during the current calendar year (except for 30 days before withdrawal) or the previous four calendar years. The Home Buyers’ Plan (HBP) considers you eligible if neither you nor your current spouse lived in a home you owned during the current calendar year before withdrawal (except for 30 days before withdrawal) or the previous four calendar years. Let’s say you want to withdraw on July 31, 2025 – you can’t have lived in a home you or your spouse owned from January 1, 2021, to June 30, 2025. Land Transfer Tax (LTT) rebates come with stricter rules. Ontario residents can’t have owned a home anywhere in the world, and neither can their spouse while being married to them. This differs from federal programs that reset your “first-time” status after four years. Special cases: separation, disability, and newcomers You might still qualify even if you’ve owned property before. Here are some exceptions: Separation or divorce: The HBP might still be available if you separated from your spouse and started living apart in the withdrawal year or the four years before. This helps people rebuild after relationships end. Disability accommodations: People with disabilities don’t need to meet the first-time buyer rule for the HBP. The same applies if you help a relative with a disability buy or build a home. The property should make it easier for the disabled person to live independently and get better care. Newcomers to Canada: New immigrants who haven’t owned Canadian property might qualify, as long as they meet the four-year rule about worldwide property ownership for most federal programs. Why definitions matter for eligibility These detailed definitions determine your access to major financial benefits. Not understanding the rules could mean you miss out on: Tax-free FHSA contributions up to $40,000 RRSP withdrawals through HBP (up to $83,601.61) Provincial rebates worth thousands Benefits from multiple programs at once Canadian programs use a four-year timeframe, unlike U.S. programs that look back three years. This makes a big difference for previous homeowners who want to qualify again. Previous homeowners who sold in 2020 might qualify for the HBP in 2025 if they meet other conditions. This creates opportunities for people planning to buy again. The 5 major first-time home buyer incentives in 2025 Image Source: Athena Law Office Canada has great incentives that make homeownership more affordable. These programs help you at different stages of your home-buying process. Here’s a look at the main financial tools you can use as a first-time buyer in 2025. 1. First Home Savings Account (FHSA) The FHSA gives you the best features of TFSAs and RRSPs combined. You can put in up to $11,146.88 annually with a total limit of $55,734.41. This account is a great option because you can deduct your contributions from taxes, and the money stays tax-free when you use it to buy a qualifying home. You can carry forward any unused room (up to $11,146.88) to next year. You must use these funds within 15 years of opening the account or by age 71, whichever comes first. The balance can go to your RRSP without affecting your contribution room if you don’t buy a home. 2. RRSP Home Buyers’ Plan (HBP) The HBP lets you use your retirement savings without tax penalties. Right now, you can take out up to $83,601.61 from your RRSP to buy or build a qualifying home. You can use both the HBP and FHSA for the same property if you meet the requirements at the time you withdraw the money. The repayment period starts in the fifth year after your first withdrawal for any money taken out between January 2022 and December 2025. 3. First-Time Home Buyers’ Tax Credit (HBTC) The HBTC gives you a non-refundable tax credit up to $2,090.04 (based on the full $13,933.60 amount) for qualifying home purchases. You and your spouse can share this credit, but you can’t claim more than $13,933.60 together. The credit works for almost all residential properties – houses, condos, townhouses, and mobile homes. This helps reduce your tax bill in the year you buy your home, which frees up money for other costs. 4. Land Transfer Tax Rebates Many provinces give rebates on land transfer taxes to first-time buyers. Ontario offers qualifying buyers up to $5,573.44 in rebates. Toronto residents might get an extra $6,235.29, which could save them more than $11,000 in total. These rebates need you to