Saving for a down payment in Toronto is a major milestone for first-time home buyers, but there are more tools and support than ever before to help reach this goal—from new government accounts, classic RRSP programs, family gifts, and smart savings strategies.
Government Incentives and Programs
The First Home Savings Account (FHSA) allows Canadians to save up to $8,000 per year (up to $40,000 lifetime) tax-free, with both contributions and growth exempt from tax as long as money is withdrawn for a first-home purchase.
- The Home Buyers’ Plan lets first-time buyers withdraw up to $60,000 from RRSPs without tax, provided the amount is repaid over 15 years.
- Ontario’s Land Transfer Tax rebate provides up to $4,000 in relief on closing costs for first-time buyers.
- Federal GST rebates for new homes may return up to $50,000, especially relevant for newly built properties, as announced for 2025.
- The federal Home Buyers’ Amount offers a $1,500 non-refundable tax credit, lowering closing costs for those eligible.
Smart Savings Strategies
Set aside a percentage of income (5–20% is typical) in an automated savings account, and prioritize windfalls—bonuses, tax refunds—by directing them immediately into your down payment fund.
- Research your desired neighbourhood and price point to set a target amount and timeline, which makes saving more actionable.
- Use high-interest or tax-free savings accounts (like TFSA or FHSA) to accelerate growth and minimize taxes.
- Reduce discretionary spending: dining out, subscriptions, and impulse purchases can all be converted into housing savings.
- Consider selling unused items or taking on temporary side work to further boost your down payment fund.
- Aim to be debt-free, especially on credit cards and high-interest loans, before taking on a mortgage—this improves pre-approval odds and monthly affordability.
Family Loans and Gifts
Many first-time buyers in Toronto rely on family help; lenders generally accept gifts from direct relatives (parents, grandparents, siblings), but not unrelated friends or non-immediate family.
- A true “gift” means no expectation of repayment; if a family member is loaning money, the amount counts as debt and must be included in mortgage qualification calculations.
- Gifted funds need to be in your bank account (and documented) at least 90 days before purchase, with lenders often requesting a signed letter confirming the money is a genuine, non-repayable gift.
- There are no tax implications for gifted down payments in Canada, but written documentation can avert misunderstandings around family dynamics and future inheritance or divorce.
Minimum Requirements and Insurance
The minimum down payment for homes under $500,000 is 5%; for the portion above that (up to $1 million), it's 10%. Homes over $1.5 million typically require 20% down and do not qualify for CMHC insurance.
If your down payment is less than 20%, you must purchase mortgage default insurance (CMHC). This adds slightly to the cost, but is often the path for first-time buyers with strong income but limited savings.
Conclusion
Combining serious saving habits with government incentives and family support can make the dream of home ownership achievable. Research all programs and reach out to trusted professionals to support your journey; every small step forward counts towards that first set of keys.