Buying Your First Home in Ontario (2025 Guide): Making Sense of Incentives, Down Payments, and New Mortgage Rules

Purchasing a first home is one of the most significant financial decisions a person will ever make.

For first-time homebuyers in Ontario, understanding what support is available and how to navigate the process is important. It helps in making informed decisions and avoiding costly mistakes.

Regardless of whether you are just starting your journey or are already saving for a down payment, this guide will provide clarity on the key considerations and supports that can assist you on your path to homeownership.

Understanding the Basics: What Qualifies as a First-Time Homebuyer in Ontario?

In Ontario, a first-time homebuyer is someone who has never owned a home anywhere in the world.

This definition also includes individuals who have not lived in a home owned by their spouse or common-law partner in the past four years.

Many government incentives are contingent upon this status, making it important to confirm your eligibility before proceeding.

Down Payments: How Much is Required?

The down payment is often the first major financial hurdle for homebuyers.

In Canada, the minimum required down payment depends on the purchase price of the home:

• For homes priced at $500,000 or less: A minimum down payment of 5% is required.
• For homes priced between $500,000 and $999,999: A 5% down payment on the first $500,000, plus 10% on the portion above $500,000, is required.
• For homes priced at $1 million or more: A minimum down payment of 20% is required.

If the down payment is less than 20%, mortgage loan insurance from the Canada Mortgage and Housing Corporation (CMHC) or another insurer is required.

This additional cost is added to your mortgage and protects the lender in case of default.

Update: 30-Year Amortization for First-Time Buyers

To improve affordability, the federal government has introduced a new policy allowing first-time homebuyers to access 30-year amortization periods on insured mortgages.

This is a shift from the previous 25-year limit.

This change applies specifically to purchases of newly built homes and is intended to reduce monthly mortgage payments.

While it increases the total interest paid over the life of the loan, it may offer breathing room for buyers facing high monthly costs in a competitive housing market.

Making Use of Government Incentives

Several government programs exist to assist first-time buyers in Ontario. Understanding these options can significantly reduce your upfront and long-term costs.

First Home Savings Account (FHSA)

The FHSA combines features of a Registered Retirement Savings Plan (RRSP) and a Tax-Free Savings Account (TFSA).

It allows eligible Canadians to contribute up to $8,000 annually (with a lifetime contribution limit of $40,000) toward the purchase of a first home.

Key benefits include:

• Tax-deductible contributions
• Tax-free growth
• Tax-free withdrawals when used for a qualifying home purchase

Unlike the Home Buyers’ Plan, there is no requirement to repay funds withdrawn from the FHSA. For many, this will be the most advantageous savings tool for a down payment.

Home Buyers’ Plan (HBP)

The HBP allows first-time buyers to withdraw up to $60,000 from their RRSP to put toward a down payment.

Unlike the FHSA, however, the HBP requires repayment of the withdrawn amount over a 15-year period.

If repayments are not made, the amount will be considered taxable income for the year.

This program remains beneficial, especially when used in combination with the FHSA.

Land Transfer Tax Refunds

Ontario first-time homebuyers may qualify for a refund of up to $4,000 on the provincial land transfer tax.

In cities like Toronto, where a municipal land transfer tax also applies, an additional refund of up to $4,475 may be available.

To qualify, the home must be used as a principal residence. The buyer must also be at least 18 years old and a Canadian citizen or permanent resident.

First-Time Home Buyers’ Tax Credit

This federal non-refundable tax credit allows first-time homebuyers to claim $10,000. The result is a credit of up to $1,500.

The credit can be split between spouses or common-law partners and is claimed on your income tax return for the year in which the home is purchased.

What Has Changed: The End of the First-Time Home Buyer Incentive (FTHBI)

As of 2024, the federal government has officially discontinued the First-Time Home Buyer Incentive.

This program provided a shared-equity loan of 5 to 10 percent of a home’s purchase price to reduce monthly mortgage payments.

Though initially helpful for some, the program was criticized for its complexity and limited uptake, especially in higher-cost regions such as Ontario.

Step-by-Step: Navigating Your First Purchase in Ontario

To demystify the process, here is a step-by-step guide to purchasing your first home:

1. Assess Financial Readiness
   Review your current savings, credit score, and employment stability. Use mortgage calculators to estimate monthly payments and affordability based on different down payment scenarios.
2. Open an FHSA or Contribute to RRSP
   Maximize your use of tax-advantaged savings accounts. Begin contributing early to benefit from tax deductions and compound growth.
3. Get Pre-Approved for a Mortgage
   Secure a mortgage pre-approval to understand how much you can borrow and at what interest rate. This also strengthens your offer when negotiating with sellers.
4. Work with a Real Estate Agent
   Partner with a licensed agent familiar with your desired neighbourhood. They can assist with listings, negotiations, and ensuring you meet all regulatory requirements.
5. Budget for Closing Costs
   Aside from the down payment, budget for legal fees, land transfer tax (minus rebates), home inspection fees, appraisal costs, and potential adjustments for utilities or property taxes.
6. Hire a Real Estate Lawyer
   A qualified real estate lawyer protects your legal and financial interests. Your lawyer will review the agreement of purchase and sale, conduct a title search, ensure proper registration, and handle the financial transactions at closing.

Taking the Next Step Toward Homeownership

First-time buyers often underestimate the complexity of the real estate process. Even small errors in documentation or timing can result in financial penalties or lost opportunities.

A real estate lawyer will ensure that:

• All contracts are fair and legally binding
• The title is free from liens or encumbrances
• Government programs and rebates are applied properly
• Your rights are protected throughout the transaction

At Howard Nightingale Professional Corporation, our experienced team guides first-time homebuyers with professionalism and care. Contact us today for a consultation to get started.

We are here to ensure that your first purchase is both successful and secure.