Buying a first home can be difficult, particularly when it comes to saving enough for the down payment and closing costs. However, first-time buyers in Prince Edward Island may have access to several provincial and federal programs that can help.
These programs do not replace the need to qualify for a mortgage, and each has its own eligibility requirements. However, understanding what is available before beginning your home search can make it easier to establish a realistic budget.
PEI Down Payment Assistance Can Provide Up to $17,500
Prince Edward Island’s Down Payment Assistance Program helps qualified first-time buyers who have difficulty providing the minimum down payment themselves.
Eligible applicants can receive a loan of up to 5% of the purchase price, to a maximum of $17,500. The money must be used toward the down payment and cannot be used for closing or other costs.
The program currently applies to households with annual income of $110,000 or less purchasing an eligible PEI home for no more than $350,000. The home must be the buyer’s principal residence.
The loan is repayable over ten years. It is conditionally interest-free: interest is accrued but forgiven when the principal has been repaid according to the program requirements.
Applications are expected to remain available until March 31, 2031, or until the funding allocated to the program has been committed.
PEI Down Payment Assistance Program
Up to $2,500 Is Available for Closing Costs
The down payment is not the only cash needed when purchasing a home. Buyers also need to prepare for legal fees and other expenses associated with completing the purchase.
PEI’s Closing Cost Support Program provides eligible first-time home buyers with up to $2,500 toward closing costs.
The program has a household income limit of $110,000 and a maximum home purchase price of $350,000. The property must be in PEI, owner-occupied and used as the purchaser’s principal residence.
For a first-time buyer with only enough savings for the minimum down payment, this additional assistance can make the costs of actually completing the purchase easier to manage.
PEI Closing Cost Support Program
First-Time Buyers May Avoid PEI Real Property Transfer Tax
PEI also provides a Real Property Transfer Tax exemption for qualifying first-time home buyers.
Among the requirements, the purchaser must intend to use the property as their principal residence and must meet the province’s definition of a first-time home buyer.
This can also apply to someone moving to PEI. A buyer who has not lived in the province for the required 183 consecutive days before purchasing may be able to receive a refund of the transfer tax after occupying the property as their principal residence for at least 183 days following registration.
Where a property has more than one purchaser, all purchasers must qualify for the first-time home buyer exemption.
PEI Real Property Transfer Tax First-Time Home Buyers Exemption
Consider Opening a First Home Savings Account Early
The federal First Home Savings Account (FHSA) can be particularly useful for people who know they would like to purchase a home but may still be a few years away from doing so.
An eligible first-time buyer receives $8,000 of participation room in the year the first FHSA is opened, with a lifetime contribution limit of $40,000. Contributions are generally tax-deductible and qualifying withdrawals used to purchase a first home can be tax-free.
One important detail is that FHSA contribution room only begins once the account has actually been opened. Someone planning to buy in the future may therefore benefit from opening an FHSA before they are actively looking at properties.
Unused participation room of up to $8,000 can also generally be carried forward to the following year.
CRA First Home Savings Account information
Your RRSP May Provide Additional Down Payment Funds
The federal Home Buyers’ Plan allows an eligible buyer to withdraw up to $60,000 from an RRSP to buy or build a qualifying home.
The Home Buyers’ Plan can also be used together with a qualifying FHSA withdrawal for the same home.
Unlike an FHSA withdrawal, however, money withdrawn through the Home Buyers’ Plan generally has to be repaid to the RRSP.
There is temporary repayment relief for people making their first Home Buyers’ Plan withdrawal between January 1, 2026 and December 31, 2028. The 15-year repayment period begins in the fifth year following the withdrawal year. Someone making their first withdrawal in 2026, for example, would begin repayments in 2031.
First-Time Buyers May Also Receive a Federal Tax Credit
After purchasing a qualifying home, an eligible first-time buyer may be able to claim the federal Home Buyers’ Amount.
The current claim is up to $10,000. This is a non-refundable tax credit, meaning it reduces federal income tax that would otherwise be payable rather than providing a $10,000 payment to the buyer.
Where more than one eligible person purchases the same home, the amount can be divided between them, but their combined claim cannot exceed the maximum allowed.
Buying a New Home? A New Federal Rebate Could Be Significant
First-time buyers considering new construction should also be aware of the new federal First-Time Home Buyers’ GST/HST Rebate.
The program applies to eligible first-time buyers purchasing, building or substantially renovating a home that will become their primary residence.
For qualifying new homes valued at $1 million or less, the rebate can recover up to 100% of the GST, or the federal portion of HST, to a maximum of $50,000.
The rebate is gradually reduced for homes valued between $1 million and $1.5 million and is unavailable at $1.5 million or more.
Because PEI uses HST, it is important to understand that this program covers the federal portion of HST, not the entire HST charged on the home.
CRA First-Time Home Buyers’ GST/HST Rebate
How Much Down Payment Do You Need?
For an owner-occupied home costing $500,000 or less, the minimum down payment generally starts at 5% of the purchase price.
For homes priced above $500,000, the minimum is 5% of the first $500,000 and 10% of the portion above $500,000.
A mortgage with less than a 20% down payment will generally require mortgage loan insurance. First-time buyers with an insured mortgage may also be eligible for an amortization of up to 30 years.
CMHC Mortgage Loan Insurance Requirements
What Could This Look Like on a $325,000 PEI Home?
Consider a first-time buyer purchasing a PEI home for $325,000.
A 5% minimum down payment would be $16,250.
Depending on their circumstances, the buyer could potentially qualify for PEI’s Down Payment Assistance Program to help provide that down payment. They might also qualify for up to $2,500 toward closing costs and for the provincial Real Property Transfer Tax exemption.
If they have accumulated savings in an FHSA or RRSP, those programs could provide additional options. After purchasing, they may also qualify for the federal Home Buyers’ Amount.
If the property is newly constructed, the federal first-time home buyer GST/HST rebate could also apply.
This does not mean every buyer can simply combine the maximum amount available through every program. Each program has its own eligibility requirements, definitions and application process.
Establish Your Budget Before Looking at Homes
The $350,000 maximum purchase price under PEI’s Down Payment Assistance Program makes early financial planning particularly important.
Someone who expects to rely on the program should determine their eligibility before concentrating on properties above that price.
A practical approach is to first determine how much mortgage financing you qualify for, investigate the programs available to you, calculate how much cash you have for the down payment and closing costs, and then establish the price range for your property search.
Don’t Spend Every Dollar Getting Into the Home
Qualifying for a mortgage and assembling the minimum down payment does not necessarily mean that a buyer should spend every dollar available on the purchase.
Home ownership brings additional expenses including property taxes, insurance, heating, repairs and maintenance.
In PEI, rural properties can also bring additional considerations such as wells, septic systems, larger driveways and snow removal.
Keeping some savings available after closing can make the transition to home ownership considerably easier.
Start With Financing Before Starting With Listings
If you are thinking about buying your first home in Prince Edward Island, begin by talking with a lender or mortgage professional about your financing and the programs for which you may qualify.
Once you have a realistic budget, a REALTOR® can help you determine what that budget currently buys in the PEI communities you are considering and help you through the offer, inspection and closing process.
Knowing your financial options before beginning your search can help you concentrate on homes you can realistically purchase—and make it easier to act when you find the right one.
