Clay Jarvis
Kurt Woock
Beth Buczynski
Home buyers in Ontario have faced a tough market for years. The average home price exceeds $850,000, and it’s more than $1,000,000 in Toronto. This can be daunting for first-time home buyers, but there are ways to succeed.
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Qualifying as a first-time buyer in Ontario
Being a “first-time home buyer” in Ontario has a specific meaning if you plan to use government assistance programs.It usually means you have never owned a home, though there are exceptions, such as:
- Separation or divorce.
- If you previously received a home as a gift or inheritance, as opposed to buying it.
Finally, to qualify for first-time home buyer financial assistance, your income will likely need to be below a certain amount, which varies by location and program.
How to balance housing dreams with market realities
Realizing how challenging the Ontario housing market can be is a critical first step in the home-buying journey. It’ll keep you motivated and can take the sting out of rejected offers.
Here are three concepts first-time home buyers can use to better align expectations with reality.
Low housing supply means higher prices in Ontario
In September 2024, Ontario had 64,503 active residential listings, according to the Ontario Real Estate Association. While that represents the highest level of housing supply for the month in five years, it’s hard for prices to fall quickly when 60,000 listings is serving a province of 15 million people.
The average price in October — $851,478 — is still out of reach for many first-time buyers.
Prices that high can be doubly scary with mortgage rates remaining higher than they’ve been in years.
Are your finances ready for a lender’s review?
Canada’s mortgage lending rules require buyers to provide at least a 5% down payment on homes that cost less than $500,000. If a property costs more than that, your down payment must be even larger. It might take years of saving before you tour your first home.
In addition to saving, it’s a good idea to speak to your mortgage lender or mortgage broker early in your home buying journey.
Factors such as the size and source of your income can affect how much you can borrow — which determines how much home you can afford. Brokers can suggest strategies to strengthen your overall finances before applying for a loan and even provide a mortgage pre-approval, which is a low-effort first step when beginning to look for a home to buy.
» TRY IT: To get an estimate of what your home buying budget is right now, use a mortgage affordability calculator.
Local activity matters most
It’s worth reaching out to an experienced, full-time real estate agent who specializes in the area where you’d like to own your first home. Real estate news often focuses on national or regional trends, but you’re not buying a trend: You’re buying a particular home in a particular place.
An agent who has a sense of your goals and spending limits will look at recent sales activity and help you understand the nuances of the market you’re in, including whether it has growth potential and whether you should expect to pay more than the asking price.
Good agents won’t sugar-coat the situation you’re facing, nor will they pressure you to bid on a home if you have no reasonable chance of winning. Their job is to help you feel prepared, both emotionally and strategically, to buy your first home.
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Explore first-time home buyer programs in Ontario
Programs that provide financial assistance to first-time buyers in Ontario aren’t likely to be game-changers for most buyers struggling with affordability, but they can help chip away at the overall cost of being a homeowner.
Ontario Land Transfer Tax Refund
Eligible first-time home buyers can get a refund of the provincial land transfer tax — an otherwise standard closing cost. Buyers won’t pay any tax for homes worth less than $368,000. Homes with a higher value can result in refunds of up to $4,000.
To qualify, you must:
- Be at least 18 years old.
- Be a Canadian citizen or permanent resident of Canada.
- Live in the home as your principal residence within nine months of registering it in your name.
» MORE: Crunch the numbers with our land transfer tax and fee calculator.
First-Time Purchaser Rebate (Toronto only)
First-time buyers in Toronto can avoid some or all of the municipal land transfer tax.
The requirements for Ontario’s provincial rebate program apply to this municipal rebate as well. The maximum refund is $4,475.
If you qualify for both the Ontario and Toronto rebates, you could shave up to $8,475.
Local Homeownership Programs
The following initiatives run by Ontario municipalities aren’t specifically for first-time buyers, but may still assist eligible buyers.
The Region of Waterloo (includes Kitchener and Cambridge)
- Type of assistance: Down payment loan.
- How much: 5% for the first $500,000 of a home’s purchase price, and 10% for any amount between $500,000 and $600,000.
- Eligibility: Household income can’t exceed $101,300. You must have resided in the region for at least the last 12 months.
Simcoe County
- Type of assistance: Down payment loan. The loan is completely forgiven if you live in the home for 20 years. If you sell before then, however, you’ll have to repay the loan in full plus a percentage of the capital gains.
- How much: 10% of a home’s purchase price, with a loan maximum of $50,000. Purchase price can’t exceed $712,300..
- Eligibility: Participants must be renters earning a gross household income of no more than $103,200.
Kingston or the surrounding County of Frontenac
- Type of assistance: Forgivable loan.
- How much: 10% of a home’s purchase price, up to a purchase price of $500,000.
- Eligibility: Renters with a pre-tax income lower than $95,000 ($130,000 for two-person households)..
Chatham-Kent
- Type of assistance: 20-year interest-free loan.
- How much: 10% of a home’s purchase price, up to $25,000. Purchase price must not exceed $410,895.
- Eligibility: Applicants earning a gross household income of $95,000
Brantford
- Type of assistance: Forgivable loan.
- How much: 5% of a home’s purchase price, up to a purchase price of $400,000.
- Eligibility: Current renters in Brantford or Brant County with a gross household income below $90,600 and assets below $30,000.
Dufferin County
- Type of assistance: Interest-free loan. If homeowners sell within 20 years, they repay the original loan and a percentage of the increase in value.
- How much: 10% of a home’s purchase price, up to a purchase price of $609,118.
- Eligibility: Income at or below $109,000 ($132,000 for two or more earners). Have assets of no more than $30,000.
District of Muskoka
- Type of assistance: Down payment loan.
- How much: 10% of the purchase price, up to $70,000. Purchase price can’t exceed $726,600.
- Eligibility: Household income at or below $112,400. Assets of no more than $50,000 for an individual or $75,000 for households.
Consider federal programs for first-time buyers in Canada
The Home Buyers’ Plan
Summary: Make tax-free withdrawals from eligible registered retirement savings plan, or RRSPs. Repay the funds within 15 years.
How much: Up to $60,000.
Eligibility requirements include:
- Be a first-time buyer.
- Be a resident of Canada.
If the HBP won’t work for you, there are a few more federal first-time home buyer grant and assistance programs worth investigating, including an easy-to-claim tax credit.
The First Home Savings Account
Summary: The First-Home Savings Account offers tax advantages similar to an RRSP or TFSA. Your deposits are tax-deductible, and any returns generated by the investments in your account are tax-free.
How much: Deposit up to $8,000 annually, up to a maximum of $40,000.
First-Time Home Buyers’ Tax Credit
Summary: The First-Time Home Buyers’ Tax Credit, also known as the Home Buyers’ Amount, is a non-refundable credit.
How much: $10,000 credit for first-time home buyers. It results in a tax rebate of up to $1,500.
GST/HST New Housing rebate
Summary: If you purchase or build a new house, or significantly renovate your primary residence, you could recoup some of the Goods and Services Tax (GST), or the federal portion of the Harmonized Sales Tax (HST), that you paid.
Eligibility requirements: Different rules apply depending on property type and location, so make sure the new home you have your eye on is eligible for a rebate.
The bottom line for first-time home buyers in Ontario
There’s a lot of frustration, and even anger, among first-time home buyers in Ontario, who feel like home ownership in the province is becoming unattainable.
It’s undoubtedly hard, but don’t let yourself be intimidated. You won’t know what’s possible until you give it a shot. To get started, follow the tried and true first-time home buyer tips:
- Create a budget. Commit to a spending and saving plan to keep your down payment savings on track.
- Generate as much income as possible. That may mean looking for a higher-paying job or taking on a roommate.
- Be persistent. Keep an eye on the market to see if competition is heating up or easing a little.
- Call an expert. Rely on guidance from professionals who understand both the real estate and mortgage landscapes, such as a real estate broker or a realtor.
And don’t take it personally if the market doesn’t cooperate. There’s nothing wrong with delaying your plans until buying a home fits more comfortably in your budget.
DIVE EVEN DEEPER
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Sandra MacGregor