Purchasing your first home, especially in expensive cities like Toronto, can be financially daunting.
Fortunately, first-time home buyers can receive incentives from both provincial and federal governments, which can alleviate the homeownership costs of Toronto’s competitive house market.
This article covers all the first-time home buyers’ incentives you can expect when buying a house in Toronto, including what you must know before taking that big step into homeownership.
Key Takeaways
- First-time home buyers in Toronto can receive land transfer tax rebates from both the municipal and provincial governments, with a maximum rebate of $8,475.
- The federal incentives that first-time home buyers in Toronto can expect include the First-Time Home Buyers’ Tax Credit, which results in a one-time $1,500 tax deduction, the GST/HST Housing Rebate, which refunds a portion of the HST paid for new houses in Ontario, and the Home Buyer’s Plan, which allows first-time home buyers to withdraw up to $35,000 from their RRSP to purchase a home.
First-Time Home Buyer’s Incentives in Ontario
Homebuyers in Ontario must pay two types of land transfer taxes: provincial and municipal.
Fortunately, first-time homebuyers in Toronto are eligible to apply for rebates on both of these taxes, allowing them to potentially receive a combined maximum total land transfer tax rebate of $8,475.
Let’s cover both these incentives in detail.
First-time Home Purchase Rebate
First-time home buyers in Ontario may be eligible for a partial or full refund of the mandatory land transfer tax that must be paid when buying land in the province.
Since 2017, the maximum amount of this rebate has been set to $4,000 (previously only $2,000).
To be eligible for this refund, the homebuyer must meet the following criteria:
- Be at least 18 years old
- Must not have owned a home or had an interest in a home in Canada or anywhere in the world (through purchase or inheritance)
If the homebuyer has a spouse, the spouse must also not have previously bought a home or held an interest in a home during the period they have been the homebuyer’s spouse.
Note: How the home was acquired, whether through purchase, inheritance, or gift, does not affect the eligibility of the refund.
Toronto Land Transfer Tax Refund
AKA the Municipal Land Transfer Tax (MLTT) rebate, this rebate covers the municipal portion of the land transfer tax that homebuyers must pay when purchasing properties within Toronto.
This rebate offers eligible buyers a tax refund of up to $4,475.
The eligibility requirements for this rebate are similar to those of the Ontario province’s Land Transfer Tax Refund. The buyer must be at least 18 years old, and neither they nor their spouse can have previously owned a home, either individually or together.
First-Time Home Buyer’s Incentives From the Government of Canada
Apart from the provincial and municipal rebates, first-time home buyers can also access incentives from the federal government of Canada.
First-Time Home Buyer Incentive
Update: Starting April 1, 2024, this program will no longer issue new approvals. The deadline for the last sets of submissions was March 21, 2024, for those who met the first-time home buyer incentive eligibility requirements.
The First-Time Home Buyer Incentive was a program that allowed homebuyers to have a shared equity with the Government of Canada.
Through this incentive, homebuyers could receive either 5% or 10% of the home purchase’s price from the government to use as a downpayment for the property, helping them reduce their monthly payments.
Those who received the incentive wouldn’t need to repay the government’s contribution until 25 years later or until their purchased property is finally sold (whichever comes first).
The total repayment amount would equal the same percentage the government invested, based on the property’s market price at the time of repayment.
First-Time Home Buyers’ Tax Credit
Also known as the Home Buyers’ Amount, the First-Time Home Buyers’ Tax Credit (HBTC) allows homebuyers who claim up to $10,000 of their eligible home purchase in their tax returns to receive up to $1,500 one-time tax deduction for that specific year.
This means that if you owe taxes to the government, the HBTC will deduct $1,500 from your payables. However, if you don’t owe taxes, this credit will simply not apply.
To get this credit, you, as the homebuyer, must not have lived in a home you or your spouse own, in or out of Canada, in the last four years.
If you’re eligible, you just need to claim $10,000 on Line 31270 of your income tax return of the same year they purchased your first home, and you’ll automatically receive the tax credit.
Note: You may split the amount with your partner or spouse, but the combined claim must not exceed $10,000. Only one of the spouses or partners must meet the eligibility requirements to claim this rebate.
GST/HST Housing Rebate
The GST/HST New Housing Rebate aims to help homeowners recover a portion of the GST/HST paid to the government for a brand-new or extensively renovated house. This rebate is only applicable to properties that are then used as the buyers’ primary residence.
Both owner-built houses and houses purchased from builders are eligible for this rebate but have different eligibility criteria.
Eligible homeowners in Ontario can receive up to 36% rebate on the GST portion of the HST they paid for their new house, up to a maximum of $6,300.
On the other hand, for the PST portion of the HST rate, Ontario homeowners can receive up to $24,000 if the HST was paid on the purchase of the land and $16,080 if it wasn’t. The house’s market value is not relevant when determining your eligibility for the PST portion of the rebate.
Home Buyer’s Plan
The Home Buyer’s Plan program allows individuals to withdraw up to $35,000 from their registered retirement savings plans (RRSPs) to purchase or build a qualifying home.
The withdrawn amounts can then be repaid within a 15-year period, starting the second year after you’ve made your first RRSP withdrawal.
To qualify for the HBP program, you must meet the following criteria:
- Be considered a first-time home buyer
- Have a written agreement that you’ll build or buy a qualifying home
- Intend to use the home as your primary place of residence within one year of purchasing or building it
Note: The Home Buyers’ Plan doesn’t affect your eligibility to withdraw money from your first home savings account (FHSA).
How Much Does it Cost To Buy a Home in Toronto?
Looking at recent data from various real estate platforms, such as Zolo and Wowa, it’s evident that, on average, it costs about $1.2M to buy a home in Toronto.
Compared to other cities in Canada, this is quite expensive, and Toronto is often regarded as one of the most expensive places to live in Canada.
What To Know When Buying a Home in Ontario
When buying a home in Ontario or anywhere in Canada, it’s crucial to consider the following factors:
- Whether homeownership is right for your
- How much you can afford to pay for housing
- The additional fees, taxes, and closing costs associated with buying a house
Sure, incentives and rebates are there to help ease the financial burden. But this doesn’t change the fact that houses are one of the biggest, if not the biggest, purchases Canadians make over their lifetime.
It’s crucial to consider your finances when making this investment carefully. You wouldn’t want to spend your hard-earned money and take out big loans to buy a home only for the property to be foreclosed when you realize you can’t afford it long-term.
Who is considered a first-time home buyer in Ontario?
In general, first-time home buyers in Ontario are individuals who haven’t previously owned houses or properties in Canada or abroad. However, this definition can vary depending on the incentive. The HBP, for example, considers anyone who, in the past four years, hasn’t occupied a home that they’ve owned as a first-time home buyer.
What are the benefits of first-time home buyers in Toronto?
In Toronto, first-time home buyers can receive both provincial and federal rebates that can save them thousands of dollars from their house-purchasing expenses. The Toronto-exclusive benefit is the Toronto Land Transfer Tax Refund, which allows homebuyers to get up to a $4,475 tax rebate.
How much is the land transfer tax in Toronto for first-time home buyers?
The land transfer tax in Toronto for first-time home buyers follows a tiered structure based on the value of the property being purchased. For example, amounts up to $55,000 are taxed at 0.5%, amounts from $55,001 to $250,000 are taxed at 1%, and so on.
What are closing costs in Ontario?
Like anywhere in Canada, the closing costs in Ontario range anywhere from 1.5% to 4% of the house’s purchase price. These costs typically cover home inspection fees, property survey fees, and title insurance.
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