Due to escalating real estate costs, stepping on the property ladder in Ontario has become a real-time puzzle. However, if you have the correct mindset and know where to look, it is achievable. As first-time home buyers in Ontario, you should prepare for a competitive market, organise your finances and look into numerous grants and assistance programmes available in Canada.
Soaring real estate prices may make the task of buying a home a nightmare for first-time home buyers. Ontario's spiking realty prices and shrinking inventory may appear to be a no-go zone for newbie buyers. However, home buyers continue to succeed in the Ontario housing market on a daily basis with the presence of first-time home buyer incentives. More than 20% of home buyers in 2021 were first-timers, a year in which the average pricing of the province surged by more than 30%.
In Ontario, trudging around in possession of your first house is no easy feat. It necessitates you to be prepared mentally and financially. Additionally, you must get assistance from professionals who can help you avoid typical blunders and, in some cases, a boost from municipal, provincial, and federal incentive programmes.
Mortgage CalculatorsQuickly calculate Monthly Mortgage
Calculate EligibilityMortgage Payment Calculator
Find out monthly and annual payments
Calculate EligibilityMortgage Amortization
Quickly calculate land transfer tax
Calculate EligibilityLand Transfer Tax Calculator
A first-time home buyer calculator is a cutting-edge AI-based financial tool. It is beneficial to the potential borrower looking to secure the maximum possible benefits of offered first-time home buyer incentives.
However, keep in mind that it is an estimation and not 100% accurate in predicting associated costs. The estimated value will be computed based on your proceedings, including your credibility, property value, and possible future rate changes. All these elements can highly influence the output generated by the calculator.
All you have to do is enter basic details including property type, home price, down payment and annual household income. Choose Ontario as the province and you are done with your part. Based upon the entered details the calculator will show you the land transfer tax rebate that you qualify for, shared equity incentive and RRSP.
A land transfer tax is imposed in Ontario based upon a tax-bracket system to the purchase price of your home. The following is a detailed summary of provincial land transfer tax in Ontario:
Land transfer tax calculation (without any rebate) for $500,000 property in Ontario
| Tax Bracket | Marginal Tax Rate (%) | Marginal Purchase Price ($) | Marginal Tax ($) | ||
|---|---|---|---|---|---|
| $55,000 - $250,000 | 1% | x | $195,000 | = | $1,950 |
| $250,000 - $400,000 | 1.5% | x | $150,000 | = | $2,250 |
| $400,000 - $2,000,000 | 2% | x | $100,000 | = | $2,000 |
| Above $2,000,000 | 2.5% | x | $0 | = | $0 |
| Total Tax (In Dollar) | $6,475 |
The Canadian province, Ontario provides a land transfer tax rebate of $4,000 (at maximum) specifically for first-time home buyers.
It's important to know what it means to be a first-time home buyer in Ontario, especially if you plan to take advantage of any provincial aid programmes or first-time home buyer incentives.
In Ontario, being a first-time home buyer means an individual has never bought a home in its entirety or in part anywhere across the globe. That is equally true if you possess a property that wasn’t purchased by you. The government of Ontario does not consider you in the category of a first-time buyer if you previously got your home as a gift or inheritance.
First-time home buyers' expectations are usually higher than other home buyers. They look at the purchase as a dream come true. They expect a lot from this house and it is no less than a paradise for them. The things that home buyers expect from their house, usually result in setting the price bar higher.
In other words, this first journey you are about to embark on can be a difficult one. One such hurdle that you will face initially in this journey is the challenging house market of Ontario. Thus, it becomes highly important to stay motivated and focused at the same time.
As a first-time home buyer, you can align your expectations with the depicted areas to get a reality check about what you are going to encounter in this home buying journey.
If you don't first have a sense of how many residential properties are out there for sale and what kind of pricing sellers are aiming for, it will be impossible to fully prepare yourself for buying a property.
As per the data released by the Ontario Real Estate Association, less than 20,000 active home listings were there in Ontario by the end of the financial year 2021-2022 i.e. March 2022. If we consider the average of the active listings in the last decade specifically for March, it clocks somewhere around 40,000.
Imagine a situation where just 20,000 properties are listed in a province with a population of nearly 15 million, bidding wars are certain to erupt. This results in driving prices even higher. In March 2022, the average price of a resale property in Ontario clocked at $1,052,920, a figure almost 18% more than the one recorded in the previous year.
For first-timers, seeing such housing prices can be terrifying. These pricy residences not only necessitate large mortgages for financing them but also necessitate a larger amount of down payments.
To qualify for a mortgage in Canada, purchasers are supposed to make a down payment of at least 5% on a home whose valuation is less than $500,000. If the property’s valuation exceeds this amount, you'll need a higher down payment.
Additionally, it is recommended to talk to a bank's mortgage expert, a direct lender, or a broker at the initial stage of your home buying journey. Take every possible step that will result in cutting down the down payment costs.
A skilled mortgage professional can do the calculations for you, calculate how much you can afford to, and do you qualify for a pre-approved mortgage for that amount. Furthermore, they can provide you with their expert advice for improving your overall financial situation prior to securing a mortgage.
Even if the chosen bank doesn’t provide any mortgage expert to help you out, you can move further with other foremost alternatives i.e. getting in touch with a broker. They can be fruitful as they will introduce you to non-banking options which will help you in coping with current financial obligations with utmost ease.
A real estate agent who specialises in the area where you want to buy your first home is another professional worth contacting.
Reputable local brokers will dive into the recent sales activities to assist you in understanding the market you are about to walk through. You will get clarity about the competitiveness of the market along with the price that you will have to pay to purchase the chosen home. All this will be done adequately after determining your financial goals and spending constraints.
Good agents won't sugarcoat the situation you're in, and they won't pressurise you into bidding on a home if your offer has little chance of being approved. Their mission is to make you feel emotionally and tactically ready to purchase your first house. The finest agents succeed by being open and honest.
First-time buyers can secure an array of programs in Ontario to get the required financial assistance. However, these programs might not prove to be game-changers for every homebuyer but are enough to chip away the overall home-buying costs.
If you fall in the category of first-time home buyers, in Ontario, then you might qualify for the provincial land transfer tax refund. This is the amount that you will pay in terms of closing costs while buying your house. The refund amount can be $4,000 at maximum for homes whose value exceeds $368,000. If your home’s valuation is less than the mentioned figure, you will not be liable to pay the land transfer tax.
You will qualify for the full refund, if:
In the case of married homeowners, the property history of the spouse may affect the refund size. In case the spouse has acquired the property individually after marriage, neither of the two will qualify for the exemption claim. But if the same property was acquired or inherited by your spouse before marriage, there will still be scope for a partial or full refund.
To determine your eligibility for the refund, you are supposed to apply for the same within 18 months of property registration.
First-time buyers can secure an additional tax relief if the purchased property is located specifically in Toronto.
To get the first-time purchaser rebate you need to qualify the eligibility criteria set for the program. However, the maximum amount for the incentives that the home buyer can secure is restricted to $4,475. If they are eligible for this rebate along with the municipal rebate you can unlock the benefit of $8,475 in total from the overall closing costs.
Some communities in Ontario conduct initiatives to assist residents in their home hunt. The initiatives listed below aren't especially for first-time home buyers, but if one appeals to you, don't hesitate to look into it further:
1. The Waterloo region, which comprises the housing hotspots of Waterloo along with Kitchener and Cambridge, gives eligible citizens a 5% mortgage for a downpayment purpose on homes worth less than $506,000. However, your household income must be less or equal to $101,300. Additionally, you must have lived in the area for at least the previous 12 months to be eligible.
2. Simcoe County's Homeownership Program offers debt for a down payment of up to 10% of the property purchase price. If you live in the purchased house for at least 20 years, the debt amount will be completely forgiven. In case you decide to sell out that property prior to the completion of 20 years, then you will be bound to pay back the debt amount in addition to 10% of the capital gain. Qualified properties must have a valuation of less than or equal to $494,600 or less. However, to avail of the benefits of this scheme, applicants' gross household income cannot exceed $99,700.
3. Renter households with a pre-tax income of less than $91,000 in Kingston or the adjacent County of Frontenac can ask to forgive debt amounts to help them save for a down payment. The debt amount can cover up to ten percent of the buying price of a home that costs less than $440,000.
4. The Chatham-Kent Affordable Homeownership Program pays candidates 7% of the home's purchase price, up to $15,000 at maximum. The money will be distributed in the form of a 20-year, interest-free mortgage.
5. Brantford, Dufferin County as well as the District of Muskoka all have similar programmes.
6. Habitat for Humanity, which constructs multi-unit buildings across the city, also accepts applications from low to moderate-income families specifically across the Greater Toronto Area.
Apart from the aforementioned first-time home buyer incentives you can pin your hopes on federal programs selectively designed for first-time buyers in Ontario.
The federal government has introduced three incentive programs to cater distinct needs of first-time home buyers. The key aim for rolling out these schemes was to increase the purchasing power to a certain extent.
The first-time home buyer incentive might be helpful in getting over the hump if you're having problems accumulating sufficient funds for a down payment. All you have to do is give the government of Canada a portion of your future home's value.
Canadians also know this program by the name "shared equity" programme. If you qualify, you can easily apply for a mortgage for 5% to 10% of the purchase price of a property. However, the amount varies based on the type of residential property you're buying. Although the borrowed amount is interest-free, the government will possess a percentage of home equity if you are approved.
You will not be obligated to repay the monetary amount borrowed when you eventually leave your property. You'll have to repay the equivalent of 5% to 10% of the property's sale price. If you borrowed $25,000 for a down payment on a $500,000 house, you'll owe the Canadian Government 5% of what the ultimate sale price is.
For example, if you keep your home for ten years and then sell it for $1 million, you will end up paying $50,000. It's still 5% of the borrowed amount, but it's now double what you borrowed before.
With the Home Buyers' Plan you get the option to withdraw up to $35,000 tax-free from a qualified Registered Retirement Savings Plan (RRSP), to use as a down payment on your principal property.
To qualify for the home buyer’s plan, you must:
You may get these funds tax-free from RRSP, but make sure that you repay the amount within 15 years.
The GTA (Greater Toronto Area) is a popular choice for first-time home buyers. The major advantage of buying in the neighbourhood, is that property is likely to appreciate in value due to consistent demand from immigrants and those who want to live close to work.
The disadvantage is that, with the average price of a GTA home now approaching $1.3 million, you'll need a minimum $260,000 to meet the 20% down payment requirement. In order to meet the payments associated with the mortgage of such an amount, you'll also need a substantial household income. Furthermore, if you opt to buy in the city of Toronto, you may end up paying twice the land transfer tax contrary to elsewhere in Canada.
Outside of the GTA (Greater Toronto Area), there are other smaller and more cheap cities to select from. Unfortunately, throughout the pandemic, that list decreased dramatically and stayed that way.
Consider a location that is rapidly rising but securing a home at this place doesn't even cost half a million dollars. Such locality will be a perfect fit if you have a limited down payment and are eager to get on the property train. There are niche places, such as those to the east and north of the Greater Toronto Area, where first-time buyers can still get a good deal.
According to data released by the Canadian Real Estate Association, there are still some medium-sized communities in Ontario where you may purchase a house by making a down payment of roughly $25,000 or less.
| City | Average Price | Price Gain (Financial Year 2021 - 2022) | Minimum Down Payment |
|---|---|---|---|
| North Bay | 451,700 Dollars | 43 Percent | 22,585 Dollars |
| Sudbury | 504,114 Dollars | 29 Percent | 25,411 Dollars |
| Sault Ste. Marie | 296,400 Dollars | 48 Percent | 14,820 Dollars |
First-time home buyers in Ontario are disgruntled, if not outraged, since they believe it is becoming impossible to buy a home in the province. It will surely be difficult, but don't be intimidated. You'll never know what's possible unless you try. To get started, use tried-and-true home buying advice like making a budget, keeping an eye on the realty market, and seeking expert assistance. Also, don't get disappointed if you don't get the expected response right away. There's nothing wrong with deferring your ambitions till the cost of a home is more manageable.
Ans: First-time home buyers in Ontario have to pay 5% of the property purchase price as a down payment.
Ans: Purchasers must not have resided in a property owned by themselves, their spouses, or common-law partners. This is specific to the preceding four-year time stipulated by CRA for qualifying as a Canadian first-time home buyer.
Ans: Yes, first-time home buyers in Ontario have to pay the land transfer tax. However, they can apply for a refund if eligible.
Ans: To save for a down payment in Ontario, count on paying off your ongoing debts, prioritise your expenses, save more, look for alternatives for current expenses, borrow from RRSP and much more.
Get The Best Offer