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?
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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
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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 live in the home as your main residence within a set time (usually 9 months) after buying. Most provinces require you to be at least 18 and a Canadian citizen or permanent resident.
5. GST/HST New Housing Rebate
New or extensively renovated homes might qualify for a GST/HST rebate. The government plans to offer a better First-Time Home Buyers’ GST rebate in 2025 that gives back 100% GST on new homes worth up to $1.39 million.
Homes valued between $1.39 million and $2.09 million will get a gradually reduced rebate. First-time buyers could save up to $69,668.01 on federal taxes for new homes.
Talk to a financial advisor who knows first-time home buyer programs well. They’ll help you pick the right mix of incentives that work best for your situation.
Hidden benefits you might not know about
Several powerful but lesser-known benefits exist beyond the simple incentives that can dramatically improve your home-buying experience.
Extended amortization to 30 years for insured mortgages
The mortgage industry has announced changes that introduced 30-year amortizations for first-time buyers. First-time homebuyers can access 30-year mortgage terms starting December 15, 2024. This extension from the standard 25-year period creates substantial monthly savings. A buyer with a 5-year fixed rate of 4.09% would pay approximately $422.19 less monthly on an average Canadian home purchase.
The change lets you qualify for a larger mortgage amount since your monthly payment requirements are lower. All the same, extending your amortization means paying approximately $2,697.55 more in interest over a five-year term.
Tax-free investment growth in FHSA
The FHSA stands out as one of Canada’s most tax-efficient investment vehicles. Your FHSA investments grow completely tax-free, including income and capital gains. Modest returns can build a meaningful down payment over the 15-year maximum account lifespan through compound growth.
RRSP to FHSA transfers without tax penalties
You can transfer funds directly from your RRSP to your FHSA without immediate tax consequences. These transfers don’t affect your FHSA contribution room, though they aren’t tax-deductible since the deduction was claimed during RRSP contribution.
You can convert previously-locked RRSP funds into tax-free withdrawal money for your home purchase without reinstating RRSP contribution room.
Stacking multiple programs for higher savings
The most powerful hidden benefit comes from combining multiple incentives. Both the FHSA and HBP withdrawals can work together for the same qualifying home purchase. Couples can each open an FHSA, maybe even doubling total savings to $111,468.82.
These stacked benefits create a powerful financial advantage for your first home purchase when combined with the improved First-Time Home Buyers’ Tax Credit of $13,933.60 (providing up to $2,090.04 in support).
Provincial and city-level programs worth exploring
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Canadian first-time home buyers can access financial relief through various provincial and municipal programs beyond federal incentives.
Ontario, BC, and PEI land transfer tax rebates
First-time buyers enjoy substantial savings through provincial land transfer tax (LTT) rebates. Ontario residents can claim up to $5,573.44 in rebates. Toronto’s residents qualify for an extra $6,235.29 municipal rebate. British Columbia’s program completely exempts homes valued up to $696,680.10, and partial rebates apply to properties between $696,680.10 and $731,514.11. Prince Edward Island’s program fully exempts qualified first-time buyers from LTT on properties under $278,672.04.
Montréal Home Purchase Assistance Program
Montréal’s program bases financial support on household type and property location. New home buyers without children receive $6,966.80, while families with children under 18 qualify for $20,900.40 for downtown properties or $13,933.60 outside downtown. The program extends these amounts to experienced buyers who have children under 13.
Quebec and Saskatchewan tax credits
Quebec’s first-time home buyer’s tax credit provides up to $1,950.70 for qualifying homes. Saskatchewan offers a $1,497.86 tax credit (10.75% of $13,933.60) that couples can divide between their tax returns.
Newcomer-specific grants and support
Newcomers can benefit from specialized provincial programs with permanent residency requirements. Ontario limits its first-time homebuyers rebates to Canadian citizens and permanent residents. Other provinces maintain different residency requirements for their programs.
Research your province’s specific programs and connect with a mortgage broker who knows local incentives to maximize these benefits.
Common mistakes and how to avoid them
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First-time buyers often make mistakes that can get pricey, even with great programs at their disposal. You can save thousands of dollars by spotting these pitfalls early.
Misunderstanding eligibility rules
A common myth suggests that the 5% down payment option exists only for first-time buyers. The truth is anyone who plans to live in the property can access this option. People often misread who counts as a “first-time buyer” since different programs define it differently. GST/HST rebates need all co-applicants to qualify as first-time buyers, while other programs might have their own rules.
Missing deadlines for rebates or repayments
FHSA accounts must close by December 31 of the year they reach their 15th anniversary. You need to close them by the end of the year you turn 71, or the year after a qualifying withdrawal – whichever comes first. The clock ticks on land transfer tax rebates too, with most requiring applications within 18 months of purchase.
Not opening FHSA early enough
Your contribution room shrinks when you open your FHSA close to your purchase date. Here’s a smart move: opening an FHSA account a year before buying lets you tap into both years’ $11,146.88 contribution room. This doubles your tax-advantaged savings to $22,293.76.
Overlooking closing costs and insurance
Banks and lenders suggest keeping 1.5-2.5% of your purchase price ready for closing costs. New buyers often underestimate these expenses:
- Legal fees: $696.68-$2,090 based on your province
- Home inspection: $418.01-$696.68
- Title insurance: About $418.01 on a $696,680.10 purchase
- Land transfer taxes (often your biggest upfront cost)
CMHC suggests setting aside 1.5-4% of your home’s price for total closing costs.
Conclusion
Buying your first home is a major step that comes with many financial perks through government programs. The First Home Savings Account lets you grow investments tax-free and contribute up to $11,146.88 each year. On top of that, the Home Buyers’ Plan lets you take up to $83,601.61 from your RRSP without penalties. These programs work great together.
One of the best strategies for first-time buyers is knowing how to combine these programs. Couples can save over $111,468.82 through their individual FHSAs. Starting your FHSA at least a year before you plan to buy will give you the most benefits.
Local programs boost your savings even more. You can save thousands through land transfer tax rebates in Ontario and British Columbia or special assistance programs in Montreal. First-time buyers now get 30-year amortization periods which lower monthly payments a lot, but you’ll pay more interest over time.
Note that each program defines “first-time buyer” differently, so research carefully to avoid missing out on these great incentives. Many new buyers don’t expect closing costs, but setting aside 1.5-4% of your purchase price creates a good safety net.
Home ownership is more available than you might think with first-time buyer programs. Understanding federal and provincial incentives, tax benefits, and planning opportunities will help guide you toward ownership with confidence. These powerful incentive programs have made your dream home much easier to reach.
Key Takeaways
First-time home buyers in Canada can access substantial financial benefits through strategic use of government programs, potentially saving tens of thousands of dollars on their home purchase.
• Stack multiple programs for maximum savings: Combine FHSA ($40,000 tax-free) with RRSP HBP ($60,000 withdrawal) and provincial rebates for over $100,000 in potential benefits.
• Start your FHSA early: Open your account at least one year before buying to access double contribution room ($22,294) and maximize tax-free investment growth.
• Take advantage of 30-year amortization: First-time buyers can now qualify for extended mortgage terms, reducing monthly payments by approximately $422 compared to 25-year terms.
• Research provincial programs: Land transfer tax rebates can save up to $11,000 in Toronto, $8,000 in BC, and provide complete exemptions in PEI for qualifying purchases.
• Understand varying eligibility rules: “First-time buyer” definitions differ between programs – federal programs use a 4-year rule while some provincial programs require you to have never owned property anywhere.
The key to maximizing these benefits lies in early planning and understanding how to combine multiple incentives strategically. With proper preparation, these programs can significantly reduce the financial barriers to homeownership in Canada.
FAQs
Q1. What is the First-Time Home Buyers’ Tax Credit (HBTC) in Canada for 2025? The HBTC allows eligible first-time home buyers to claim up to $13,933.60 on their federal income tax, resulting in a non-refundable tax credit of up to $2,090.04. This credit can be used to reduce the amount of tax owed in the year of home purchase.
Q2. How can first-time home buyers maximize their savings in Canada? First-time buyers can maximize savings by stacking multiple programs. This includes using the First Home Savings Account (FHSA) for tax-free savings, withdrawing from RRSPs through the Home Buyers’ Plan (HBP), and taking advantage of provincial rebates. Combined, these programs can potentially provide over $100,000 in benefits.
Q3. What are the benefits of opening a First Home Savings Account (FHSA) early? Opening an FHSA at least a year before buying allows you to access double the contribution room ($22,293.76) and maximize tax-free investment growth. This strategy can significantly boost your down payment savings in a tax-advantaged manner.
Q4. Are there special mortgage terms for first-time home buyers in Canada? Yes, as of 2025, first-time buyers can qualify for 30-year amortization periods on insured mortgages. This extended term can reduce monthly payments by approximately $422 compared to standard 25-year terms, making homeownership more affordable.
Q5. What provincial incentives are available for first-time home buyers? Provincial incentives vary but can be substantial. For example, Ontario offers land transfer tax rebates of up to $5,573.44, with an additional $6,235.29 available in Toronto. British Columbia provides exemptions on homes valued up to $696,680.10, while Prince Edward Island offers complete exemptions on properties under $278,672.04 for qualifying buyers.