Buying a home is an exciting but nerve-wracking adventure. Finding the right home for you or your family and the idea of making it your own space is thrilling but the process of buying a home is also scary, particularly when the benchmark home price for all property types in Canada was just over $816,000 in February 2022, according to the Canadian Real Estate Association of Canada.
Fortunately for first-time and repeat buyers, as well as current homeowners, there are a number of rebates available and the savings really help to cut the high costs of buying and owning a home.
How Do Rebates work?
Most saving programs offered to homeowners or homebuyers are through tax rebates.
A tax rebate is when the government refunds money you already paid. Typically, you must pay the full cost and then fill out the necessary forms in order to apply for the rebate.
However, there are circumstances where a rebate reduces the overall amount you must pay out of pocket—making it more like an instant rebate, rather than a mail-in rebate.
The government (as well as some businesses) will use rebates to incentivize Canadians to take certain actions. For instance, anyone who contributes to their RRSP can expect a rebate or a reduction in taxes owed. To incentive Canadians to buy homes, there are a number of first-time buyer rebates. Repeat buyers and current homeowners can also find cost savings through other rebates and refunds.
How Much Can You Save with a Homebuyer Rebate?
While researching taxes and potential rebates doesn’t sound all that exciting, the potential to save hundreds and even thousands makes it a very popular and lucrative strategy to minimize buying and ongoing homeowner costs.
To help, here is a rundown of rebates and refunds aimed at first-time homebuyers, repeat buyers and current homeowners. You can find a larger list of tax-saving strategies in my new book, House Poor No More: 9 Strategies that Grow the Value of Your Home and Net Worth.
What Rebates are Available to First-Time Homebuyers?
First-Time Home Buyers’ Tax Credit (HBTC)
The first-time homebuyers’ tax credit was introduced by the Federal Government in the 2009 Federal Budget. It was a non-refundable tax credit that was calculated by multiplying the lowest personal income tax rate by $5,000. For instance, if the lowest tax rate was 15%, then first-time buyers would get $750 back ($5,000 multiplied by 15%).
In the 2022 Federal Budget, it was announced that HBTC would double from $5,000 to $10,000, which increases the maximum potential rebate from $750 to $1,500.
In order to qualify for the HBTC, you or your partner must not be living in a home you own in the year you purchase the new house. The HBTC is also applicable for those who are not first-time homebuyers if they are registered as disabled or buying the house for a family member with a registered disability.
Learn more about the First-Time Home Buyers’ Tax Credit.
Land Transfer Tax (LTT) Refunds for First-Time Homebuyers
In most provinces, buyers must pay a land transfer tax when they buy a home. This applies to any type of property, from condos to townhouses to single-family homes.
Each province sets its own land transfer tax rates, as do some municipalities.
Alberta and Saskatchewan are the only two provinces that do not charge land transfer tax (these provinces charge a much smaller transfer fee, instead), while Toronto is the only municipality to charge a separate, additional land transfer tax.
To help reduce the financial impact of the LTT, there are land transfer tax rebates for first-time homebuyers in Ontario, British Columbia, Prince Edward Island, and in the City of Toronto.
While the LTT refund is only available to first-time buyers, that doesn’t mean a couple or family must forfeit the entire rebate if one person is a repeat buyer. For instance, if a parent, who is not a first-time buyer, and an adult child, who is a first‑time homebuyer, purchase a home, each owning half, then the child may claim a refund of 50% on the LTT.
Learn more about Land Transfer Tax Rebate in British Columbia, Ontario, and Prince Edward Island.
CMHC Mortgage Loan Insurance
The Canadian Mortgage and Housing Association (CMHC) helps first-time homebuyers with less than 20% saved up for a down payment. By purchasing mortgage default loan insurance, buyers can buy a property for as little as 5% down (although, minimum down payments will increase along with the home sale price).
Any buyer with a down payment between 5% and 19.99% will be required to pay the mortgage default premiums—a cost known as CMHC fees, or mortgage insurance fees.
Over the last half-decade, many personal finance experts suggested buyers avoid these fees as a way to save money, but it turns out this advice may be wrong. By putting down less than 20%, homebuyers get access to much better mortgage rates and this can help to save them money over the long term. To learn more, read: “Why you don’t have to put 20% down.”
Learn more about CMHC Mortgage Loan Insurance.
CMHC Green Home
The Canadian Mortgage and Housing Association Green Home rebate offers first-time homebuyers a rebate between 15% and 25% off the mortgage default premiums paid when purchasing the property (assuming the buyer put less than 20% down on their home purchase).
In order to qualify for the refund, the property purchased must be built to LEED Canada New Construction standards or the building is designed to be either 20% or 40% more energy-efficient than current, applicable building codes.
Learn more about CMHC Green Home.
What Rebates are Available to First-Time or Repeat Homebuyers?
Federal GST/HST New Housing Rebate
The New Housing Rebate is available to homebuyers who purchase new construction homes that are valued at $450,000 or less. Homebuyers can expect a refund of the 5% federal goods and services tax (GST) portion of the harmonized sales tax (HST). The maximum rebate a buyer can expect is $6,300 and homes over $450,000 are not eligible for the New Housing Rebate.
Homeowners who opt to build or significantly renovate their home or buyers who convert non-residential into a home are also eligible for this rebate, as long as the property value is less than $450,000.
Learn more about the GST/HST New Housing Rebate.
Provincial HST New Housing Rebate
Many provinces also offer a rebate on the provincial portion of the harmonized sales tax (HST), with the value differing according to the region. In addition to the federal 5% rate, homebuyers can get an extra rebate percentage depending on their province. These include:
- British Columbia: 7% rebate
- Alberta: no rebate
- Saskatchewan: 6% rebate
- Manitoba: 8% rebate
- Ontario: 8% rebate
- Quebec: 9.975% rebate
- New Brunswick: 10% rebate
- Nova Scotia: 10% rebate
- Newfoundland: 10% rebate
- Prince Edward Island: 10% rebate
Learn more about how to calculate and apply for a provincial HST New Housing Rebate.
What Rebates are Available to Current Homeowners?
Energy Efficiency Incentive Program (EEIP)
The Energy Efficiency Incentive Program offers a rebate that ranges from $50 to $1,500.
Homeowners can access this rebate by upgrading household items such as appliances, heating systems, and even LED light bulbs from inefficient incandescent bulbs.
There are also a number of municipal-specific rebates available regarding energy efficiency which can be found here.
Learn more about the Energy Efficiency Incentive Program.
Home Accessibility Tax Credit (HATC)
The federal government offers tax rebates for those who upgrade a home to make it accessible for those with a disability. These upgrades are related to making the home more functional for those less mobile or reducing the risk of harm within the dwelling. The total eligible expense that can be claimed by a homeowner is $10,000.
Learn more about the Home Accessibility Tax Credit.
Home Renovation Tax Credit
There are a number of province-specific tax credits available to homeowners, including the Home Renovation Tax Credit for seniors and those with a disability. This credit is offered to residents in B.C. and New Brunswick and provides the homeowner with a credit of up to $1,000 per tax year. The total refund is calculated by the qualifying renovation expense by 10%, to a maximum of $10,000 in expenses.
As a refundable tax credit, if the calculated tax credit is higher than the taxes you owe, you’ll receive the difference as a refund.
Learn more about the Home Renovation Tax Credit in British Columbia and New Brunswick.
Quebec offers the Renovert tax credit which rebates up to $10,000 for upgrades to a home that make it more energy-efficient or eco-friendly. Learn more about the Renovert Tax Credit.
Moving and Work-from-home rebates
If, for example, your new home is at least 40 kilometres closer to your place of work or school, you can claim a rebate for your moving expenses. Also, if you work from home, you can claim a rebate on some of your utility bills according to the Business-Use-Of-Home Expenses.
Of course, all these rebates and tax credits are related to your specific circumstances and each has its own set of regulations that determine whether you are eligible or not. Make sure you explore each rebate in further detail before making any assumptions. Talk to a tax expert if you are unsure.
As an overview, Canada is eager to help first-time homebuyers get their foot on the property ladder. Beyond the main programs, the majority of tax credits available are related to energy efficiency and accessibility for the disabled.
They say “it’s not what you know, it’s who you know,” well, in the world of tax credits and rebates, this rule simply doesn’t apply. In this instance, saving money is definitely a matter of what you know. Arm yourself with knowledge!
Canada Greener Homes
The Canada Greener Homes grant is a series of rebates that are meant to incentivize homeowners to upgrade various home components in order to create a more energy-efficient property.
This particular rebate program starts with getting a certified energy audit (aka: Home Energy Audit) that determines how energy efficient your home is, in its current state. This report will then give recommendations for energy-efficient upgrades you could complete in order to make your home less resource-intensive. This list of updates also gives the homeowner access to refunds and rebates on eligible upgrades, up to a maximum of $5,600—with $5,000 in rebates coming from the updates you complete and $600 going towards the energy audit.
Learn more about the Canada Greener Homes rebate.
When Rebates Aren’t an Option—Look for Other Savings Programs
If you don’t qualify for rebates, there are other ways to help you save or find the money for a down payment on a home.
The latest program is the First Home Savings Account (FHSA). This initiative was just announced by the Federal Liberal Government in Budget 2022. While precise details are not yet known, here’s what we do know:
The First Home Saving Account (FHSA)
Starting in 2023, first-time homebuyers will get the option to save up to $40,000 in a new tax-free savings account. According to government documents, the FHSA will combine the best feature of an RRSP—the tax-deductible contributions—with the best feature of a TFSA—no tax on withdrawals.
Like the TFSA and RRSP, the FHSA will also have a ceiling on the amount each person can contribute—currently set at $8,000 per year.
The other benefit is that once the money is withdrawn, tax-free, that money does not have to be repaid (although, it does have to be used to purchase a home).
For those starting to contribute in 2023, when the account will first be available, it will take approximately five years to save up the maximum $40,000 that can be withdrawn in order to purchase a home. For a couple that means in five years, contributing the max each year, this is $80,000 of tax-free money to be used for a home purchase.
Learn more about the First Home Savings Account.
Home Buyers’ Plan (HBP)
The standard go-to, at present, is the federal Home Buyers’ Plan (HBP). To qualify as a first-time homebuyer, you cannot have owned property for the four years before applying for the HBP and you cannot live in a property owned by your spouse or common-law partner for the same period of time.
The HBP allows each individual to withdraw up to $35,000 per year from their Registered Retirement Savings Plan (RRSPs)—for a maximum of $70,000 per family unit. The interest- and tax-free withdrawal must be used to either construct or purchase a home for yourself or for a family member with a disability. Each participant then has 15 years to repay the full amount.
Learn more about the Home Buyers’ Plan.
First-Time Home Buyer Incentive (FTHBI)
The First-Time Home Buyer Incentive is a shared-equity mortgage. This program is a shared equity mortgage. Through this program, the federal government shares the equity in the purchase of your home. In exchange, the federal government will give the buyer 5% or 10% of the purchase price of a home. You don’t have to pay back this loan until you sell the property or within 25-years of owning the home, whatever comes first. Keep in mind that when you pay back the loan you are paying back the 5% of 10% of the home value, not the dollar value you received when you first bought the home.
Learn more about the FTHBI.
