Buying your first home is one of the biggest financial decisions you will make. Canada offers several programs and incentives specifically for first-time buyers that can save you tens of thousands of dollars. This guide covers everything you need to know to prepare, from savings strategies to closing day.
Programs for first-time home buyers
Canada has four major programs that help first-time buyers save money and access tax benefits. Used together, a couple can access over $200,000 in tax-advantaged funds.
First Home Savings Account (FHSA)
The FHSA is the most powerful tool for first-time buyers, combining the best features of the RRSP and TFSA:
| Feature | Details |
|---|---|
| Annual contribution limit | $8,000 |
| Lifetime contribution limit | $40,000 |
| Tax deduction | Yes (reduces taxable income) |
| Tax-free withdrawal | Yes (for qualifying home purchase) |
| Carry-forward | Up to $8,000 unused room |
| Repayment required | No |
| Must be first-time buyer | Yes |
Tax savings example: Contributing $8,000/year for 5 years at a 40% marginal rate saves $16,000 in taxes — money that can go toward closing costs or furnishing.
If you do not end up buying a home, you can transfer the FHSA to your RRSP without using RRSP contribution room. See our TFSA vs FHSA comparison to decide how to prioritize your savings.
RRSP Home Buyers’ Plan (HBP)
The Home Buyers’ Plan lets you withdraw up to $60,000 from your RRSP tax-free for a qualifying first home ($120,000 for a couple).
| Feature | Details |
|---|---|
| Maximum withdrawal | $60,000 per person |
| Tax on withdrawal | None (if repaid) |
| Repayment period | 15 years (starting 2nd year after withdrawal) |
| Minimum annual repayment | 1/15 of total withdrawn |
| Missed repayment | Added to taxable income for that year |
Important: Unlike the FHSA, HBP withdrawals must be repaid. If your annual repayment is $4,000 and you skip it, $4,000 is added to your taxable income. Factor this into your budget.
First-Time Home Buyers’ Tax Credit
First-time buyers can claim a $10,000 non-refundable tax credit on their income tax return, providing up to $1,500 in tax relief (at the 15% federal rate). Both you and your spouse can claim if you are both first-time buyers, for up to $3,000 combined.
GST/HST New Housing Rebate
If you buy a newly-built home, you may be eligible for a rebate of up to 36% of the GST/HST paid, up to a maximum of $6,300 (federal portion). The maximum applies to homes priced up to $350,000, with a partial rebate for homes priced between $350,000 and $450,000. Provincial rebates may also apply.
How much home can you afford?
Before house hunting, determine your budget using the GDS and TDS ratios that lenders use:
| Ratio | Maximum | What It Measures |
|---|---|---|
| Gross Debt Service (GDS) | 39% | Housing costs ÷ gross income |
| Total Debt Service (TDS) | 44% | All debt payments ÷ gross income |
Use our mortgage affordability calculator to see exactly how much home your income supports, or try the income to afford home calculator to work backwards from a target price.
Down payment requirements
| Home Price | Minimum Down Payment | Amount on $600K Home |
|---|---|---|
| Up to $500,000 | 5% | $25,000 |
| $500,001 – $1,499,999 | 5% of first $500K + 10% of remainder | $35,000 |
| $1,500,000+ | 20% | N/A |
With less than 20% down, you will need mortgage insurance (CMHC), which adds 2.80%–4.00% of the mortgage to your balance. Use our down payment calculator to see the exact minimum for your target price.
Maximizing your down payment
A first-time buyer couple using all available programs can accumulate substantial tax-advantaged savings:
| Source | Individual | Couple |
|---|---|---|
| FHSA (contributions + growth) | ~$50,000+ | ~$100,000+ |
| RRSP Home Buyers’ Plan | $60,000 | $120,000 |
| TFSA withdrawals | Variable | Variable |
| Total tax-advantaged | $110,000+ | $220,000+ |
Recommended savings order:
- Open an FHSA immediately (starts the contribution room clock)
- Maximize FHSA contributions each year ($8,000)
- Build RRSP for the HBP withdrawal
- Use TFSA for overflow savings
- Use non-registered savings as a last resort
The mortgage stress test
All borrowers at federally regulated lenders must pass the stress test, which requires you to qualify at the higher of:
- Your contract rate + 2%, or
- The qualifying rate floor of 5.25%
For example, if your actual rate is 4.19%, you must qualify at 6.19%. This reduces the maximum amount you can borrow compared to your actual payment. The stress test protects buyers from rate increases but means you need more income to qualify.
Understanding closing costs
Beyond the down payment, budget 1.5%–4% of the purchase price for closing costs:
| Cost | Typical Range | First-Time Buyer Rebate? |
|---|---|---|
| Land transfer tax | 1% – 4% of price | Yes (Ontario: up to $4,000, Toronto: up to $4,475; BC: up to $8,000 on homes ≤ $500K) |
| Legal fees | $1,500 – $2,500 | No |
| Home inspection | $300 – $600 | No |
| Title insurance | $200 – $400 | No |
| Appraisal | $300 – $500 | No |
| Property tax adjustment | Variable | No |
| Moving costs | $1,000 – $3,000 | No |
Use our closing costs calculator for a detailed estimate based on your province and purchase price.
Fixed vs variable: choosing your mortgage rate
One of the first decisions you will make is whether to choose a fixed or variable rate mortgage:
| Option | Best For |
|---|---|
| 5-year fixed | Certainty and predictable payments (most popular for first-time buyers) |
| Variable rate | Lower starting rate, willingness to accept payment fluctuation |
| Short-term fixed (1–3 years) | Expectation that rates will be lower at renewal |
Compare current mortgage rates to see what is available.
Step-by-step home buying process
1. Assess your finances
- Calculate how much you can afford using our affordability calculator
- Check your debt service ratios
- Review your credit score (aim for 680+)
2. Save for your down payment
- Open an FHSA and start contributing
- Build your RRSP for the Home Buyers’ Plan
- Save in your TFSA for additional funds
3. Get pre-approved
- Contact multiple lenders to compare rates
- Pre-approval locks in a rate for 90–120 days
- Determines your maximum purchase price
4. Find a home
- Work with a real estate agent (buyer pays no commission in most markets)
- Research the housing market in your target area
- Attend open houses and request showings
5. Make an offer
- Include conditions (financing, home inspection, title search)
- Budget for the deposit (typically 5% of offer price, held in trust)
- Negotiate terms with the seller
6. Finalize your mortgage
- Meet your lender’s conditions (appraisal, employment verification)
- Choose your rate type and term
- Review the mortgage stress test qualification
- Arrange mortgage insurance if down payment is under 20%
7. Close the deal
- Lawyer reviews title and prepares documents
- Pay closing costs (usually wired 1–2 days before closing)
- Receive keys on the closing date
- Claim the First-Time Home Buyers’ Tax Credit on your next return
Essential calculators for first-time buyers
💰 How Much Can I Afford?
Mortgage Affordability Calculator — Enter your income and debts to find your maximum home price.
📊 Monthly Payments
Mortgage Calculator — Calculate your monthly payment at different rates and amortizations.
🏠 Down Payment
Down Payment Calculator — See the minimum down payment for any home price.
🛡️ Mortgage Insurance
CMHC Insurance Calculator — Estimate insurance premiums for down payments under 20%.
📋 Stress Test
Stress Test Calculator — Check if you qualify under the qualifying rate.
💵 Income Needed
Income to Afford Home — Find the salary required at different home prices.
🏘️ Closing Costs
Closing Costs Calculator — Estimate land transfer tax, legal fees, and other costs.
🏦 FHSA Growth
FHSA Calculator — Project your First Home Savings Account growth and tax savings.
📈 Debt Ratios
Debt Service Ratio Calculator — Check your GDS and TDS before applying.
🏢 Land Transfer Tax
Land Transfer Tax Calculator — Calculate LTT by province, including first-time buyer rebates.
🔒 Loan-to-Value
Loan to Value Calculator — See your LTV ratio and whether you need insurance.
📉 Rent vs Buy
Rent vs Buy Calculator — Compare the true cost of renting versus buying.
Provincial first-time buyer incentives
Beyond federal programs, several provinces offer additional incentives:
| Province | Incentive | Benefit |
|---|---|---|
| Ontario | Land transfer tax rebate | Up to $4,000 (plus Toronto MLTT rebate of $4,475) |
| British Columbia | Property transfer tax exemption | Full exemption on homes ≤ $500,000; partial to $525,000 |
| British Columbia | BC Home Owner Grant | Reduces property tax by up to $570/year |
| Prince Edward Island | Real property transfer tax rebate | Rebate for first-time buyers |
| Nova Scotia | Provincial tax rebate | Municipal deed transfer tax exemptions in some municipalities |
Check your provincial government website for the most current programs and eligibility requirements.
Explore the housing market
Not sure where to buy? Our housing market reports cover prices, trends, and affordability across Canada:
City reports: Toronto · Vancouver · Calgary · Ottawa · Montreal · Edmonton · Winnipeg · Halifax · Hamilton · Victoria · London · Waterloo Region
Provincial reports: Ontario · British Columbia · Alberta · Quebec
Get started today
The sooner you start saving, the sooner you can buy. Open an FHSA to begin accumulating tax-deductible contribution room and invest commission-free. Get a $25 bonus when you open an account.