Taking the plunge into homeownership in Ontario remains one of life’s most significant financial milestones. Fortunately, first-time buyers have access to several powerful incentives designed to ease this substantial financial commitment. Here’s a comprehensive guide to the updated 2025 first-time homebuyer incentives available to Ontario residents, including detailed eligibility criteria and actionable tips to maximize each benefit.
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RRSP Home Buyers’ Plan
The RRSP Home Buyers’ Plan allows first-time homebuyers to withdraw up to $60,000 tax-free from their RRSP to purchase or build a qualifying home in Canada. Withdrawals must be repaid into your RRSP within 15 years, with minimum annual repayments.
Eligibility Criteria:
- Be a Canadian resident.
- Not have owned or lived in a home owned by you or your spouse within the past four years.
- Intend to occupy the home as your principal residence within one year of purchase.
- You must have a signed agreement to buy or build the qualifying home.
Maximization:
- If both you and your partner qualify, you can withdraw up to a combined $120,000, significantly increasing your purchasing power.
- Begin contributing to your RRSP early, ideally several years before you plan to purchase, to take advantage of the $60,000 withdrawal limit.
- Use this plan in conjunction with other programs, such as the FHSA, to optimize tax advantages and maximize your overall down payment.
Tax-Free First Home Savings Account (FHSA)
The FHSA, recently introduced, uniquely combines features of both RRSP and TFSA accounts. You can contribute up to $8,000 annually, with a lifetime limit of $40,000. Contributions are tax-deductible, and all withdrawals (including investment growth) for a home purchase are entirely tax-free.
Eligibility Criteria:
- Must be a Canadian resident aged 18 or older.
- Must be a first-time home buyer, defined as having no homeownership within the previous four calendar years.
Maximization:
- Couples should open individual FHSAs, effectively doubling their total savings potential to $80,000.
- Start your contributions as early as possible to maximize investment growth.
- Utilize the FHSA first before resorting to the RRSP Home Buyers’ Plan, as FHSA withdrawals do not need repayment.
First-Time Home Buyers’ Tax Credit
This federal income tax credit allows first-time buyers to claim up to $10,000 on their tax return, resulting in a non-refundable tax credit of up to $1,500. This helps offset closing costs and other expenses associated with your first home purchase.
Eligibility Criteria:
- Must be a first-time homebuyer (no ownership within the past four years).
- Home must be occupied as your principal residence within one year of purchase.
Maximization:
- The credit is available per home, not per individual. If buying as a couple, carefully determine who should claim it based on who benefits most from the tax reduction.
- Ensure you have enough taxable income to fully utilize this credit to maximize savings.
CMHC Eco Plus Program
This incentive refunds 25% of your CMHC mortgage insurance premium if your newly constructed home meets specific energy efficiency standards. For instance, purchasing a $500,000 home with a 10% down payment could result in a rebate of approximately $3,500.
Eligibility Criteria:
- The home must be newly built (not previously occupied).
- It must meet high energy efficiency standards (e.g., ENERGY STAR, R-2000, LEED).
Maximization:
- Choose builders or homes already certified to meet CMHC’s energy-efficient criteria.
- Apply promptly within two years of purchase, as funds must be claimed within this timeframe.
- Combine with other green initiatives or rebates at the municipal or provincial level for additional savings.
Ontario Land Transfer Tax (LTT) Refund
First-time homebuyers in Ontario receive a refund of up to $4,000 on the Land Transfer Tax, effectively covering the entire tax on homes priced up to $368,000.
Eligibility Criteria:
- Never owned residential property anywhere in the world.
- Must occupy the home as your principal residence within nine months of purchase.
- Must be at least 18 years old and a Canadian citizen or permanent resident.
Maximization:
- Married couples must both qualify as first-time buyers to receive the full rebate. If one spouse previously owned property, the rebate is entirely forfeited unless only the eligible spouse is on the title.
- Non-married buyers receive proportional rebates based on their ownership percentage. Strategically structuring ownership can maximize this benefit.
Toronto Municipal Land Transfer Tax Rebate
Toronto residents enjoy an additional rebate of up to $4,475 on the city’s municipal Land Transfer Tax, doubling the potential provincial rebate. Combined, these rebates can amount to $8,475.
Eligibility Criteria:
- Criteria are identical to Ontario’s provincial rebate.
Maximization:
- Ensure both rebates (provincial and municipal) are claimed simultaneously at closing.
- Married couples must both qualify to receive the full rebate, or else consider single-title ownership if only one spouse qualifies.
Local Municipal Homeownership Assistance Programs
Several Ontario municipalities provide down payment assistance programs to first-time buyers, often as forgivable loans after 20 years.
Examples include:
- Region of Waterloo: Forgivable down payment loan of 5-10% of home price.
- Simcoe County: Provides up to $50,000 as a 10% forgivable loan.
Maximization:
- Check local municipal websites early, as these programs often have limited funds and operate on a first-come, first-served basis.
- Understand the conditions and long-term commitments required, such as maintaining primary residence status for up to 20 years to avoid repayment.
Upcoming or Proposed Incentives:
- Federal GST Rebate: Full GST rebate proposed for new homes under $1 million.
- Extended CMHC Amortizations: Insured mortgages for first-time new home buyers may now have up to 30-year amortizations.
Stay vigilant for these potential upcoming incentives to further optimize your financial planning for homeownership.
Leveraging these detailed incentives strategically can significantly reduce your financial burden, making your dream of homeownership a more achievable and rewarding milestone.