Can you do something and then later do it again for the first time? You can if that “first time” involves buying a home.
There are a few supports and programs in place for first-time buyers in Canada, including the Home Buyers’ Plan and the first home savings account (FHSA). First-time home buyers may also be eligible for land transfer tax rebates.
Chances are, if you’ve used one of these incentives in the past, you won’t need to a second time. However, there are a variety of reasons you may want to participate in a first-time home buyer program again—and you might just qualify.
“It truly depends on the program,” says Denise Laframboise, a mortgage broker with LaframboiseMortgage.ca in Brooklin, Ont. “Each program has its own criteria for [qualifying as a] first-time home buyer. It isn’t a one-size-fits-all across every program and every provincial or municipal incentive.”
Can you qualify as a first-time home buyer twice?
Yes. However, each home buying program in Canada applies its own definition of “first-time home buyer,” and you will have to fall within that definition to qualify. Read more about Canada’s first-time home buyer programs and whether you can access their benefits more than once.
The Home Buyers’ Plan
Upcoming changes to the Home Buyers’ Plan
The 2024 federal budget proposes to increase the HBP withdrawal limit from $35,000 to $60,000 per person. The new limit would apply to withdrawals made after April 16, 2024. The budget also proposes to temporarily increase the starting point for repayments by three years to begin in the fifth year after the withdrawal.
The Home Buyers’ Plan (HBP) is a federal program that allows first-time home buyers to withdraw up to $35,000 out of their registered retirement savings plan (RRSP) for the purpose of buying or building a home. Couples buying a place together can access up to a total of $70,000 from their RRSPs. The HBP works like a self-loan, in that borrowers must repay their RRSP gradually within 15 years. If they don’t, a portion of the funds withdrawn is taxed as income each year.
The HBP defines a first-time home buyer as someone who has not owned a home, nor occupied a home that their current spouse or common-law partner owned, within the last four years. That last part is what opens the doors of the HBP to second-time home buyers. As long as your home purchase falls outside the four-year window, you can use money from your RRSP to buy a second house without the tax implications of withdrawing.
Note that the eligibility window is longer than it seems. It begins on Jan. 1 of the fourth year prior to the withdrawal from your RRSP. So, let’s say you intend to pull money from your account on Nov. 15, 2024. In order to do so, you must not have owned a home since at least Jan. 1, 2020—that’s nearly five years.
You might be wondering about couples who have separated and are no longer living together. Previously, there were no exceptions to the four-year rule mentioned above. But under new rules introduced in 2019, a person can qualify as a first-time buyer again under the following conditions:
- You have been living separate and apart from your spouse or common-law partner for at least 90 days.
- You are not living in a home owned by a new partner or spouse at the time of withdrawing funds.
That’s not all. To use the program a second time, you must have fully repaid your previous HBP balance before Jan. 1 of the year of your next RRSP withdrawal. Depending on how much you took out, it may be tricky to repay the full amount on time.
The first home savings account
Launched in 2023, the first home savings account (FHSA) is a registered account designed to help Canadians save for the down payment on a home. Canadian residents over the age of 18 can open an FHSA and contribute up to $8,000 per year to the account, up to a lifetime limit of $40,000.
As its name suggests, the FHSA is intended for first-time home buyers. And as with other programs, the definition of first-time home buyer is not applied as strictly as you might think. But with the FHSA, you must be considered a first-time home buyer on two occasions: when you first open the account and again when you withdraw the funds to purchase a property.
At the time of opening an FHSA:
- You must not have not lived in a qualifying home that you owned or jointly owned at any time in the calendar year before the account is opened, or at any time in the preceding four calendar years.
- You must not have lived in a qualifying home that your spouse or common-law partner owned or jointly owned, at any time in the calendar year before the account is opened or at any time in the preceding four calendar years.
At the time of making a qualifying withdrawal:
- You must not have lived in a qualifying home at any time in the current calendar year before the withdrawal—except the 30 days immediately before the withdrawal—or at any time in the preceding four calendar years.
- You must not have lived in a qualifying home as your principal residence that you owned or jointly owned, at any time in the current calendar year before the withdrawal or or at any time in the preceding four calendar years.
Land transfer tax rebates
You can’t escape taxes. No matter where you’re buying a home in Canada, you’re going to pay land transfer taxes or fees. It’s a hefty expense of several thousand dollars, and it can easily be overlooked. Fortunately, the governments of Toronto, Ontario, British Columbia, and Prince Edward Island offer land transfer tax rebates to first-time home buyers.
But, unfortunately for those buying a second home, these programs are the most restrictive of the bunch. If you’ve bought a house before, or you lived in a home that belonged to your spouse or common-law partner, you’re no longer eligible for these tax rebates.
In fact, every jurisdiction specifies that you cannot have previously owned a home, or even had a share of a home, anywhere in the world. And in Ontario, it doesn’t even matter if you didn’t buy the home yourself. Inheriting or being given a home still counts as having been a first-time home buyer.
The benefits of being a first-time home buyer—again
For some Canadians, home ownership seems like a difficult goal to achieve, so Laframboise suggests considering all your options.
“If there’s a program that can assist you in purchasing a home federally, provincially or municipally, it is worth exploring,” advises Laframboise. “Some [of my] clients are able to purchase homes in a higher price range or sooner than they thought possible through first-time buyer initiatives, so it really can be a valuable tool in your home ownership journey.”
The same approach can apply to buying a home a second time, as long as you meet the eligibility requirements. For repeat buyers, Laframboise adds that it’s good to have a conversation with a mortgage broker or financial advisor who can determine the pros and cons related to your specific situation.
Laframboise points to a few recent clients who have been able to take advantage of first-time home buying programs for the second time. When divorcing or separating, a person’s household income may be divided in two, but life’s expenses (including paying for a home) often remain the same. In these cases, first-time home buyer programs can help people re-enter the real estate market sooner than if they didn’t use them.
However, it’s something that may not be possible, or even the best decision, for everyone, Laframboise adds. When markets are in a downfall, for example, not everyone should or is able to withdraw from an RRSP through the HBP.
Take advantage of Canada’s first-time home buyer rules
As strange as it may seem, it is possible to be a “first-timer” more than once—at least as far as Canada’s home buying programs are concerned. The HBP and the FHSA apply broad definitions of a first-time buyer, and that’s a little-known fact that could potentially benefit you.
Read more on buying a second home:
- How to know if a secondary suite or basement apartment is legal—and a worthwhile investment
- Should you buy real estate through a corporation?
- Will you make money on your rental property?
- Is a vacation home a good investment?
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