Buying your first home in Canada has never been cheap, but the government has created several programmes to help first-time buyers get a foot on the property ladder. Between the RRSP Home Buyers' Plan, the new First Home Savings Account, the First-Time Home Buyers' Tax Credit, and land transfer tax rebates, there are genuine opportunities to save thousands of dollars.
The problem is that most people do not know about all of them, and even fewer understand how to use them together. Let us walk through each one and show you how to maximise your savings.
The Home Buyers' Plan (HBP)
The Home Buyers' Plan lets you withdraw up to $60,000 from your RRSP to buy or build your first home, completely tax-free. If you are buying with a partner who is also a first-time buyer, you can each withdraw $60,000, for a combined total of $120,000.
Normally, RRSP withdrawals are added to your income and taxed. The HBP is a special exception — as long as you follow the rules, you pay no tax on the withdrawal. The catch is that you have to pay the money back into your RRSP over a 15-year period, starting the second year after the withdrawal. So if you withdraw $60,000, you need to repay at least $4,000 per year for the next 15 years.
If you miss a repayment, that amount gets added to your taxable income for the year. It is not a penalty per se, but it does mean you end up paying tax on it — which is what the HBP was designed to help you avoid.
To qualify, you must be considered a first-time home buyer (you have not owned a home you lived in during the previous four calendar years), and the RRSP funds must have been in the account for at least 90 days before the withdrawal.
Our RRSP calculator can help you see how much you could save by contributing to your RRSP before using the HBP.
The First Home Savings Account (FHSA)
The FHSA is a newer programme that launched in 2023, and it is arguably the best savings tool ever created for Canadian first-time home buyers. It combines the best features of an RRSP and a TFSA into one account.
Here is how it works:
- You can contribute up to $8,000 per year, to a lifetime maximum of $40,000
- Contributions are tax-deductible (like an RRSP), so they reduce your taxable income
- Growth inside the account is tax-free
- Withdrawals for a qualifying home purchase are completely tax-free (like a TFSA)
So you get a tax break going in and no tax coming out. That is remarkable. On a $40,000 contribution at a 30% combined marginal rate, you save $12,000 in tax just from the deductions, plus all the investment growth is yours to keep tax-free.
You can have both an FHSA and use the RRSP Home Buyers' Plan. That means a first-time buyer could potentially access up to $100,000 in tax-advantaged savings ($60,000 from the HBP + $40,000 from the FHSA), or $200,000 as a couple.
The account must be open for at least one year before you can make a qualifying withdrawal, and you have up to 15 years to use the funds (or until you turn 71, whichever comes first). If you do not end up buying a home, you can transfer the FHSA funds to an RRSP without affecting your contribution room.
The First-Time Home Buyers' Tax Credit (HBTC)
This is a non-refundable federal tax credit worth $10,000, which translates to $1,500 in actual tax savings (15% of $10,000). It is not a lot compared to the other programmes, but it is easy to claim and requires no advance planning.
You claim it on your tax return for the year you bought the home. You can split the credit with your spouse or common-law partner, but the combined claim cannot exceed $10,000. To qualify, neither you nor your partner can have owned a home you lived in during the year of purchase or the previous four calendar years.
Use our tax credits calculator to see how this and other credits reduce your total tax bill.
Land Transfer Tax Rebates
When you buy a property in Canada, most provinces charge a land transfer tax (or property transfer tax) based on the purchase price. These costs can be substantial — on a $500,000 home in Ontario, for example, the land transfer tax is $6,475. In Toronto, there is an additional municipal land transfer tax on top of that.
Several provinces offer rebates for first-time buyers:
- Ontario: First-time buyers get a rebate of up to $4,000 on the provincial land transfer tax. In Toronto, there is an additional municipal rebate of up to $4,475.
- British Columbia: First-time buyers are exempt from the property transfer tax on homes up to $500,000, with a partial exemption on homes up to $525,000.
- Prince Edward Island: First-time buyers are exempt from the real property transfer tax.
Our land transfer tax calculator shows you exactly what you will pay based on the province and purchase price, including any first-time buyer exemptions.
GST/HST New Housing Rebate
If you are buying a newly built home (not a resale), you pay GST or HST on the purchase price. However, you may qualify for the GST/HST New Housing Rebate, which refunds a portion of the tax.
For the federal GST portion, you can get back up to 36% of the GST paid on homes priced up to $350,000. The rebate phases out between $350,000 and $450,000. Several provinces that charge HST (Ontario, Nova Scotia, New Brunswick, Newfoundland, and PEI) offer their own rebates on the provincial portion as well.
On a new $400,000 home in Ontario, this rebate can be worth $24,000 or more. It is worth checking with your builder or real estate lawyer to make sure you are claiming it.
Putting It All Together: A Savings Example
Let us say you are a first-time buyer in Ontario earning $75,000 a year, buying a $500,000 resale home. Here is what you could save by using all the available programmes:
- FHSA tax deductions: $12,000 in tax savings (on $40,000 in contributions at ~30% marginal rate)
- RRSP HBP: $60,000 withdrawn tax-free for your down payment
- HBTC: $1,500 tax credit
- Ontario LTT rebate: $4,000
- Total potential savings: $17,500+ in tax savings and rebates, plus $100,000 in tax-free funds for your down payment
That is a significant amount of money, and it is all perfectly legal and available to anyone who qualifies.
Other Costs to Budget For
While you are planning your home purchase, do not forget about the other costs that come with buying a home:
- Legal fees: $1,500 to $3,000 for a real estate lawyer
- Home inspection: $400 to $600
- Title insurance: $200 to $400
- Moving costs: $500 to $3,000 depending on distance
- CMHC insurance: if your down payment is less than 20%, you will pay mortgage default insurance, which can add thousands to your mortgage
Our mortgage calculator can help you figure out your monthly payments and see how different down payment amounts affect your costs, including CMHC insurance.
The Bottom Line
Buying your first home in Canada is expensive, but there are real programmes designed to help. The FHSA, the RRSP Home Buyers' Plan, the HBTC, and provincial land transfer tax rebates can collectively save you tens of thousands of dollars. The key is to plan ahead — open an FHSA as early as possible, contribute to your RRSP, and understand what rebates are available in your province.
Use our salary calculator to understand your take-home pay, and our mortgage calculator to see what you can afford. A little planning now can make a big difference when you are ready to buy.