How Canada’s New GST Rebate Policy Makes Buying Your First Home More Affordable

Buying your first home has always been a major milestone — and a major expense. For most Canadians, it means saving for years, carefully weighing mortgage options, and preparing for all the costs that come with homeownership. But now, a new federal policy could make that first step a little more manageable.

As of May 27, 2025, the Canadian government has introduced a First-Time Home Buyers’ GST Rebate (FTHB GST Rebate). This program offers significant tax relief on newly built homes purchased by first-time homebuyers, with the potential to save up to $50,000 on the total price of a home.

If you're a first-time buyer considering a new build, here’s what you need to know — from who qualifies to how much you could save.

What Is the FTHB GST Rebate?

The FTHB GST Rebate is a newly launched federal initiative aimed at reducing the financial burden of buying a first home. It works by eliminating (or partially eliminating) the 5% federal GST on the purchase of newly constructed homes.

Here’s how it breaks down:

• Full GST rebate on new homes valued up to $1 million.

• Partial rebate for homes priced between $1 million and $1.5 million, phased out on a linear scale.

• No rebate for homes priced at or above $1.5 million.

That means eligible buyers could save up to $50,000 on a new build, depending on the purchase price and how the GST is applied in the transaction.

Who Is Considered a First-Time Buyer?

To qualify for this rebate, you must meet specific criteria. According to the government, a first-time homebuyer is someone who:

• Is at least 18 years old

• Is a Canadian citizen or permanent resident

• Has not owned or lived in a home they (or their spouse/common-law partner) owned in the current calendar year or in the preceding four years

• Is buying the home for use as their primary residence

Only one of the buyers in a joint purchase needs to meet the first-time buyer condition, but no buyer or their spouse can have claimed this rebate before.

Eligible Property Types and Conditions

The FTHB GST Rebate is flexible in the types of properties it covers, provided they are newly constructed or substantially renovated. Here are the three main eligible categories:

1. New Homes Purchased from a Builder

• The buyer enters into a purchase agreement with a builder on or after May 27, 2025 and before 2031.

• The home must be substantially completed before 2036.

• The purchaser (or a co-purchaser) must be the first to occupy the home.

2. Owner-Built Homes

• You can claim the rebate on GST or the federal portion of HST you pay on construction materials and services.

• Construction must begin after May 27, 2025 and be completed before 2036.

• The home must be used as your primary residence and you must be the first to live in it.

3. Cooperative Housing (Co-ops)

• Applies to shares purchased in a co-op that give the right to occupy a new or substantially renovated unit.

• The co-op must have paid GST/HST on the construction.

• Same timelines and first-occupancy rules apply.

This rebate does not apply to:

• Purpose-built rental housing

• Resales of existing homes

• Assignment sales where the original agreement was signed before May 27, 2025

How Much Can You Actually Save?

Let’s look at a typical scenario: you buy a new condo in Toronto for $1 million. Normally, you’d pay $50,000 in GST (5% of the purchase price). Under the FTHB GST Rebate, that full amount becomes refundable.

Impact on Mortgage:

According to Desjardins, a buyer who saves $50,000 in GST on a $1 million home could lower their mortgage payments by up to $240 per month, assuming the GST would have otherwise been rolled into the loan.

In addition to easing monthly payments, the rebate reduces your required down payment, potentially making homeownership more attainable sooner.

Why This Matters Now

This isn’t the first time Canada has offered a GST rebate on housing — but it’s the first time such a large-scale rebate is exclusively targeted at first-time homebuyers.

Previously, the New Housing Rebate offered limited relief, but was capped at homes priced under $450,000 — a figure that doesn’t reflect housing costs in most urban centers.

With the new rebate:

• About 85% of new builds nationwide are expected to qualify.

• In Toronto, 92% of new homes will likely fall within the rebate range.

• Even in high-cost markets like Vancouver, roughly three-quarters of new builds may still qualify.

This policy is expected to deliver $3.9 billion in tax savings to Canadians over the next five years.

Things to Watch Out For

As with any government rebate, there are important limitations and fine print to consider:

• You can only claim the rebate once in your lifetime.

• If your spouse or common-law partner has already used it, you can’t claim it.

• Homes must be substantially completed before 2036.

• Rebate ineligibility applies to certain assignment sales and altered agreements made to retroactively qualify.

Buyers should also be mindful of how GST is charged in their purchase agreement. Some builders include GST in the sale price, while others list it separately. How this is handled can affect your cash at closing and how you receive the rebate.

Will This Impact the Housing Market?

The rebate is expected to boost interest in new construction, especially in soft markets like condos in downtown Toronto. However, economists warn that supply-side issues could dampen the benefit if construction doesn’t keep pace with demand.

There’s also a risk that builders could raise prices to absorb some of the new buyer purchasing power. That’s why experts are calling for the program to be paired with long-term supply strategies and pricing safeguards.

Still, this policy comes at a time when many first-time buyers are struggling to get into the market due to high interest rates, inflation, and limited inventory. In that context, the rebate offers tangible, immediate savings.

Thinking about buying a new home?

For first-time homebuyers, the new GST rebate is a welcome change. It makes new construction more affordable, aligns with real market prices, and gives buyers a better shot at entering homeownership sooner.

But it also requires careful planning. From understanding eligibility to navigating closing costs and construction timelines, this is a rebate that rewards those who prepare early and do their homework.

With up to $50,000 on the line, it's worth getting expert advice before you make your move.