Welcome to our comprehensive guide on incentives for first-time homebuyers in Mississauga, Toronto, and GTA. Buying your first home is an exciting milestone, but the financial aspects can often seem challenging, that’s why it’s a good idea to be aware of the financial incentives that can help. These incentives can make a significant difference in achieving homeownership, both before and after your purchase. Here’s an overview of the key programs –

  1. First Home Savings Account (FHSA)

The FHSA is an excellent way for aspiring homeowners to save and achieve their dream of owning a home. First-time qualified homebuyers can contribute $8,000 annually and up to $40,000 in total for an individual or $80,000 for couples. Contributions are tax-deductible like an RRSP, while withdrawals, including investment growth, are non-taxable like a TFSA. You can carry forward $8,000 in unused contributions to the next year.

Parents who are gifting funds to their children for a home purchase should consider contributing to an FHSA on their behalf. This gives their children the bonus of a tax refund for those contributions.

Unlike the RRSP Home Buyer’s Plan (HBP), the FHSA has no repayment obligation.

The program allows for transfers from your RRSP to your FHSA. This strategy gives you a tax-free RRSP withdrawal, although you don’t get a tax deduction for the transfer, and this does not affect your RRSP contribution room.

Should you not buy a house, you have the option to withdraw your balance as taxable funds or move it to your RRSP tax-free and unlock additional contribution room.

More information including how to strategically use the FHSA can be found here.

  1. RRSP Home Buyer’s Plan (HBP)

An effective strategy to help you realize your homeownership dreams is to utilize your RRSPs for a downpayment boost. First-time buyers can receive a tax-free withdrawal of up to $35,000 from their RRSP ($70,000 per couple). This amount can serve as a significant portion of the down payment and help you reach the 20 percent down threshold required to avoid mortgage default insurance premiums.

To further bolster your downpayment, if you have the contribution room, consider contributing up to $35,000 to your RRSP account at least 90 days before closing. You could put your existing downpayment funds to work for this short period. With this contribution, a sizeable tax refund can be triggered which can help cover many of the costs associated with your purchase. The withdrawn funds will need to be kept in the account for a minimum of 90 days before they can be withdrawn. To not be required to pay taxes, you’ll need to repay the RRSP withdrawal within 15 years according to the repayment plan. Or, 1/15th of the amount withdrawn will be added to your taxable income each year.

Note: Both the FHSA and the HBP can be used for the same home purchase. This means that up to $150,000 could be available to help a couple with their downpayment.

  1. First-Time Home Buyer Tax Credit

New homebuyers can receive up to $1,500 in federal tax relief through the $10,000 first-time home buyer tax credit. This tax credit can be claimed on your personal tax return for the year of purchase and can assist with many of your first home expenses.

  1. Land Transfer Tax Rebate

In Ontario, homebuyers are subject to land transfer tax upon purchasing a property, which is calculated as a percentage of the property price. First-time homebuyers in Brampton, Toronto, and GTA are often surprised by the substantial land transfer tax they must pay. However, you may qualify for a partial or full rebate of up to $4,000. Purchasing a home in Toronto could entitle you to an extra rebate of up to $4,475.

  1. HST New Housing Rebate

When buying a new construction home or making significant renovations to an existing one, you may be eligible to recover some of the HST that you paid if certain criteria are met. The Ontario government will provide a 75% refund of their portion of the HST on the first $400,000 of your home’s value, which is $24,000.

You must apply within two years of the closing date and utilize the home as either yours or an immediate family member’s primary residence. Ensure that only immediate family members are on the title, or you won’t qualify. If you think you may qualify, check out the CRA’s GST/HST New Housing Rebate guide.

  1. CMHC Eco Plus or Sagen Energy-Efficient Housing Program

If you purchase an energy-efficient home with a CMHC or Sagen-insured mortgage, you may qualify for up to a 25 percent refund of the mortgage insurance premium you paid, which can be quite significant savings. This refund also applies to those who choose to buy a home and make it more energy efficient. Canada Guaranty has a similar program called Energy-Efficient Advantage Program.

  1. Enbridge Home Energy Rebate

Ontario homeowners who want to make their home energy efficient can get up to $10,000 in rebates for eligible retrofits such as home insulation, windows, doors, and renewable energy systems. This applies to all homeowners and not just first-time buyers.

Enbridge Gas along with Natural Resources Canada (NRCan) have joined together and made it easier to apply for the Canada Greener Homes Grant. Ontarians who are not Enbridge customers continue to be eligible to receive up to $5000 in Canada Greener Homes Grant. More details are available from Enbridge.

A Note on the First-Time Homebuyer Incentive

This program is a shared equity program with the federal government that was designed to help first-time buyers get into the market by providing 5 percent of the cost of an existing home, or 10 percent of the purchase price of a new home. This has not been a popular program because homebuyers do not want to share their equity gains with the government, especially if they invest in renovations. Homebuyers look at homeownership as a strong long-term investment and sharing equity gains goes against that objective.

The government has extended this program to March 31, 2025, and is considering ways to make it make more acceptable to first-time homebuyers because usage of the program has been exceptionally low.

Contact Joe Purewal, Mortgage Broker

Navigating the world of incentives and understanding which ones you qualify for can be complex. As a Mortgage Broker with extensive experience in the Mississauga, Toronto, and GTA markets, Joe can guide you through the process and help you take advantage of the incentives available to you.

Contact us today to schedule a consultation. Together, we’ll explore your eligibility for incentives, discuss your financial goals, and develop a personalized strategy to help you achieve homeownership. Don’t let the challenges of buying your first home hold you back. Let’s work together to unlock opportunities and make your dream of owning a home a reality.

Now that you’ve checked out financial incentives, consider some common mistakes to avoid as a first-time homebuyer.

Looking at homes before getting preapproved: Getting pre-approved helps you understand how much you can afford to spend on a home. Without knowing your budget range, you may look at homes that are outside your financial reach, leading to disappointment. Or you may even qualify for more than you think.

Sellers often prefer working with buyers who have been pre-approved for a mortgage. It shows that you are a serious buyer who has taken the necessary steps to secure financing. Having a pre-approved mortgage can give you an advantage during negotiations and increase your chances of having your offer accepted.

Overall, a pre-approval helps you set realistic expectations, strengthens your position as a buyer, and increases your confidence when making an offer on a property.

Jumping in without talking to a Mortgage Broker about key preparation like credit score improvement: Working with a Mortgage Broker before starting the home buying process is essential for first-time buyers. A Mortgage Broker can help you understand your financial situation and provide guidance on what type of mortgage you can realistically afford.

Your Mortgage Broker will also guide you on all the ways you can improve your financial situation, so you qualify for the best rates. Ultimately, working with a Mortgage Broker can make the home-buying process smoother, less stressful, and more successful.

Ignoring the importance of a real estate agent: A knowledgeable and experienced real estate agent can provide valuable guidance throughout the home-buying process. They can help negotiate the best price, navigate paperwork, and protect your interests. If you don’t have a realtor, we can refer you to the best realtors in Mississauga, Toronto, or the GTA.

Overlooking hidden costs: Beyond the purchase price, there are additional costs involved in buying a home, such as mortgage default insurance and closing costs. Failing to budget for these costs can lead to financial strain. Homeownership also comes with ongoing expenses such as property taxes, maintenance, repairs, and utility bills. Make sure to budget for these costs to avoid financial pressure after purchasing your home.

Skipping the home inspection: A home inspection is crucial to uncover any underlying issues with the property. Skipping this step can result in unexpected and costly repairs down the line. Always insist on a professional home inspection.

Not considering future needs: Think about your future plans and how the home will accommodate them. Consider factors such as the size of the property, number of bedrooms, proximity to schools or amenities, and potential for resale value.

By avoiding these common mistakes and approaching the home-buying process with careful planning and research, you can increase your chances of a successful and satisfying home purchase.