First-Time Home Buyer Program

The Government of Canada has two programs to assist first-time home buyers –  the First-Time Home Buyers’ Tax Credit (HBTC), and the Home Buyers’ Plan (HBP). In addition to these federal programs, the Ontario Government offers land transfer tax refunds to first-time home buyers. As well, mortgage loan insurance is available from the Canada Mortgage and Housing Corporation.

First-Time Home Buyers’ Tax Credit (HBTC) 

The First-time Home Buyers’ Tax Credit exists to assist first-time home buyers with the costs associated with the purchase of a home, such as legal fees, disbursements and land transfer taxes. The HBTC is a $5,000 non-refundable income tax credit amount on a qualifying home acquired after January 27, 2009. For an eligible individual, the maximum credit amount is $750. You are considered eligible if:  1) you or your spouse or common-law partner acquired a qualifying home; and 2) you did not live in another home owned by you or your spouse or common-law partner in the year of acquisition or in any of the four preceding years. 

Home Buyers’ Plan (HBP)  

The Home Buyers’ Plan allows first-time home buyers to withdraw up to $25,000 from their RRSPs on a tax deferred basis to use toward the purchase of a home in Canada. To qualify as a first-time home buyer, purchasers must not have lived in a home owned by themselves or their spouses or common-law partners in the preceding four-year period outlined by CRA. If both you and your spouse or common-law partner qualify under the Plan, you can each withdraw up to $25,000 from your RRSPs for a total of $50,000.

Before you are entitled to withdraw the money from your RRSP, you must have entered into a written agreement to purchase or build a home that you intend to occupy as your principal residence. The purchase of a cottage or a commercial property, for example, would not qualify for this program because they are not a principal residence. 

Money can be withdrawn from your RRSP provided it has been in your RRSP for at least 90 days. If you have signed an Agreement of Purchase and Sale and you have at least 90 days until your closing, you can open an RRSP and make a contribution, receive the tax deferred benefit and then withdraw the same money and put it toward the purchase of your home. 

Money withdrawn under this federal program must be paid back to your RRSP within 15 years. People generally deposit one fifteenth of the amount withdrawn back to the RRSP over each of the following 15 years. If you do not pay the full amount back to your RRSP within 15 years, the amount outstanding will be subject to tax when you file your income tax return in the following year.