Buying a newly constructed home in Ontario can involve expenses that do not arise in a typical resale transaction. In addition to the purchase price, buyers may encounter development charges, utility fees, Tarion-related costs, legal fees, land transfer tax, and builder adjustments.
Harmonized Sales Tax can also represent a significant cost. Ontario’s HST rate is 13%, consisting of a 5% federal portion and an 8% provincial portion. Although HST is often included in a builder’s advertised price, the agreement may assume that the buyer qualifies for and assigns certain rebates to the builder.
Federal and provincial measures introduced in 2026 have expanded the relief available to some Ontario buyers. Eligibility may depend on the purchase price, intended use of the property, agreement date, construction timeline, and whether the purchaser qualifies as a first-time buyer.
Why HST Applies to Newly Built Homes
HST generally applies to a new or substantially renovated home purchased from a builder. This may include a detached or semi-detached house, townhouse, condominium unit, mobile home, floating home, or certain cooperative housing interests.
Most previously occupied residential homes are exempt from HST. This is one reason tax considerations can differ significantly between a resale property and a pre-construction or newly completed home.
A substantial renovation generally requires at least 90% of the interior of an existing building to be removed or replaced, excluding certain structural elements. A kitchen renovation, basement finishing project, or room addition will not necessarily meet that threshold.
The Existing GST/HST New Housing Rebate
The longstanding GST/HST new housing rebate allows qualifying purchasers to recover part of the 5% federal portion of the HST paid on a new or substantially renovated home. The property must generally be intended as the primary residence of the buyer or a qualifying relation.
Under the existing federal rebate, eligibility is gradually reduced and generally eliminated once the purchase price or fair market value reaches $450,000. Because many Ontario homes exceed this threshold, the rebate may provide limited assistance in higher-priced markets.
Ontario also offers a rebate for part of the 8% provincial portion of the HST. This rebate is generally calculated as 75% of the provincial HST paid, up to a maximum of $24,000. It may remain available above the federal price threshold, provided the other requirements are satisfied.
The Federal First-Time Home Buyers’ Rebate
A federal first-time home buyers’ GST/HST rebate became available in 2026. It may provide eligible first-time buyers with up to $50,000 in relief from the 5% federal portion of the HST.
The rebate provides full federal relief for qualifying homes valued at up to $1 million. For homes valued between $1 million and $1.5 million, the rebate is gradually reduced. It is not available once the value reaches $1.5 million.
For homes purchased from a builder, the agreement must generally have been entered into on or after March 20, 2025, and before 2031. Construction or substantial renovation must begin before 2031 and be substantially completed before 2036.
Who Qualifies as a First-Time Buyer?
First-time buyer status does not necessarily mean that a person has never owned real estate. A purchaser may potentially qualify again after a sufficient period without living in a home owned by them or their spouse or common-law partner.
Generally, the individual must be at least 18 years old and be a Canadian citizen or permanent resident. The buyer must not have lived in a home, in Canada or elsewhere, that they or their spouse or common-law partner owned as a primary residence during the current calendar year or the previous four calendar years.
At least one purchaser must satisfy the first-time buyer requirements, intend to use the home as a primary residence, and be the first person to occupy it after construction or substantial renovation.
Ontario’s First-Time Home Buyers’ Rebate
Ontario has introduced a first-time home buyers’ rebate covering the 8% provincial portion of the HST. Eligible purchasers may recover up to $80,000 when buying, building, or substantially renovating a qualifying first home.
The provincial rebate generally follows the requirements of the federal first-time home buyers’ rebate. It may therefore apply alongside the federal rebate, subject to the applicable price limits, occupancy rules, timelines, and other conditions.
Where both measures apply to a qualifying home valued at no more than $1 million, a first-time buyer may potentially recover up to $130,000 in combined federal and provincial HST relief.
Ontario’s Temporary Enhanced New Housing Rebate
Ontario has also introduced a temporary enhanced rebate that is not restricted to first-time buyers. This measure may benefit repeat buyers purchasing a qualifying newly constructed or substantially renovated home.
The rebate is generally available where an individual enters into an agreement of purchase and sale with a builder on or after April 1, 2026, and on or before March 31, 2027. The home must generally be intended as the primary residence of the buyer or a qualifying relative.
The rebate provides full recovery of the 8% provincial portion of the HST for qualifying homes valued at up to $1 million. It provides a flat provincial rebate of $80,000 for homes valued between $1 million and $1.5 million, followed by a reduced rebate for homes between $1.5 million and $1.85 million.
Ontario’s Additional Federal-Portion Top-Up
The temporary Ontario program also includes relief corresponding to the 5% federal portion of the HST. Eligibility for this additional amount depends on the purchaser qualifying for and receiving the Ontario enhanced rebate.
A first-time buyer who qualifies for the federal rebate must generally claim that amount first. Any remaining unrecovered portion may then be available through the Ontario program, depending on the circumstances.
For builder purchases, the rebate may be credited at closing where the builder participates and the required conditions and documentation are satisfied.
Primary Residence Requirements Matter
The new housing rebates are generally intended for homes that will become the purchaser’s or a qualifying relation’s primary residence. A property bought mainly as a rental investment will not normally qualify for the owner-occupied rebate programs.
A different program, known as the GST/HST new residential rental property rebate, may apply where a qualifying new home is leased for long-term residential use.
Eligibility issues may arise when a purchaser’s plans change before closing. A buyer who decides to rent the property, assign the agreement, or allow someone else to occupy the home may no longer qualify for the rebate originally anticipated.
The Rebate May Be Assigned to the Builder
Many builder agreements calculate the purchase price on the assumption that the purchaser will qualify for the applicable rebates and assign them to the builder. The builder then credits the expected rebate against the HST payable on closing.
If the purchaser does not qualify, the agreement may require them to pay the value of the expected rebate as an additional closing adjustment. This can create a substantial and unexpected expense.
Buyers should review how the purchase price is expressed, which rebates have been assumed, what declarations must be signed, and what happens if their eligibility changes before closing.
Timing and Documentation Can Affect Eligibility
Rebate programs are subject to deadlines and documentary requirements. Depending on the transaction, a purchaser may need to provide the agreement of purchase and sale, statement of adjustments, proof of occupancy, identification, invoices, or construction records.
The relevant dates vary between programs. The federal first-time buyer rebate applies to qualifying builder agreements entered into beginning March 20, 2025, while Ontario’s temporary enhanced rebate generally applies to agreements entered into between April 1, 2026, and March 31, 2027.
Assignments, amendments, delayed closings, purchaser changes, and changes in occupancy plans may complicate the analysis. Keeping complete transaction records can help clarify which rebate rules apply.
Review the HST Provisions Before Signing
The expanded federal and Ontario rebates can materially reduce the cost of purchasing a newly built home. They do not apply automatically to every buyer or property.
Before signing a new-build or pre-construction agreement, purchasers can review the HST provisions, rebate assignment, occupancy requirements, construction timelines, closing adjustments, and consequences of becoming ineligible. Addressing these issues early may reduce the risk of an unexpected shortfall at closing.
Bader Law: Mississauga and Oakville Residential Real Estate Lawyers for New-Home Purchases
Buying a new or pre-construction home can involve detailed builder agreements, HST rebate provisions, occupancy requirements, closing adjustments, and strict transaction deadlines. The real estate lawyers of Bader Law assist buyers in Mississauga, Oakville, and throughout the GTA with residential real estate purchases, including new-build homes, condominiums, townhouses, assignment transactions, and substantially renovated properties.
Contact Bader Law online or call (289) 652-9092 to discuss the legal documents and closing requirements involved in an Ontario new-home purchase.