First-time home buyers
Buying your first home comes with a lot of firsts. A licensed mortgage professional helps you get pre-approved, understand your down payment options and the programs available to first-time buyers, and compare offers from multiple lenders.
Key points
- You’re usually a first-time buyer if you haven’t lived in a home you or your partner owned in the last four years.
- Your minimum down payment depends on the price. Under $1.5 million, you can put down less than 20% with an insured mortgage.
- The FHSA and the RRSP Home Buyers’ Plan can work together to build your down payment faster.
- Closing costs come on top of your down payment, so plan for them from the start.
What counts as a first-time buyer?
Most federal programs treat you as a first-time buyer if, in the current year or the four years before it, you didn’t live in a home that you, your spouse or your common-law partner owned. You can be a first-time buyer even if you owned a home years ago.
Ontario’s land transfer tax refund for first-time buyers has its own rule: you can’t have owned a home, or had an interest in one, anywhere in the world. Toronto’s rebate follows the same idea, so check you qualify before you count on it.
How much you need for a down payment
In Canada, the minimum down payment is set in tiers. You pay 5% on the first part of the price and 10% on the part above that. Homes priced at $1.5 million or more need 20% down.
If you put down less than 20%, your mortgage needs default insurance. It protects the lender, not you, but it’s what makes a smaller down payment possible.
| Home price | Minimum down payment | As a share of the price |
|---|---|---|
| $400,000 | $20,000 | 5% |
| $600,000 | $35,000 | 5.8% |
| $900,000 | $65,000 | 7.2% |
| $1,500,000 | $300,000 | 20% |
Based on current federal rules: 5% of the first $500,000 and 10% of the amount between $500,000 and $1.5 million.
How NorthMerit can help
Tell us what you’re planning and we’ll connect you with one licensed mortgage professional who compares lenders for you. It’s free, and there’s no obligation.
What default insurance costs
The insurance premium is a percentage of your mortgage amount. The smaller your down payment, the higher the percentage. Most buyers add the premium to their mortgage instead of paying it up front, so it’s spread over the life of the loan.
In Ontario, 8% provincial sales tax applies to the premium. It can’t be added to the mortgage, so it has to be paid in cash at closing.
| Down payment | Typical premium |
|---|---|
| 5% to 9.99% | 4.00% of the mortgage |
| 10% to 14.99% | 3.10% of the mortgage |
| 15% to 19.99% | 2.80% of the mortgage |
| 20% or more | No insurance needed |
Approximate current premiums. A 30-year amortization, available to first-time buyers on insured mortgages, adds a small surcharge.
Programs that help first-time buyers
Two savings programs do most of the heavy lifting. The First Home Savings Account (FHSA) lets you save with tax-deductible contributions and take the money out tax-free for your first home. The RRSP Home Buyers’ Plan lets you borrow from your own RRSP and pay it back over time. Many couples use both, which can add up to a meaningful down payment.
| Program | What it does | Good to know |
|---|---|---|
| First Home Savings Account (FHSA) | Tax-deductible savings, tax-free withdrawal for a first home | Annual and lifetime contribution limits apply |
| RRSP Home Buyers’ Plan | Withdraw from your RRSP for a down payment | You repay it to your RRSP over 15 years |
| First-time Home Buyers’ Tax Credit | A federal credit on your tax return | Claim it for the year you buy |
| Land transfer tax rebates | Reduce or remove land transfer tax | Ontario refunds some or all of it for first-time buyers, and Toronto offers its own rebate |
How lenders decide what you can borrow
Lenders look at your income, your debts and your down payment. They also apply the mortgage stress test, which checks that you could still afford payments if rates went up. You qualify at the higher of 5.25% or your offered rate plus two percentage points, even though you’ll actually pay the lower rate.
This is why getting pre-approved before you shop matters. A pre-approval tells you the price range that works, and many lenders will hold a rate for 90 to 120 days while you look.
Closing costs to plan for
Closing costs are paid on the day you get your keys. They aren’t part of your down payment and usually can’t be added to your mortgage, so they need to come from savings.
| Cost | Typical range | Notes |
|---|---|---|
| Land transfer tax | Varies widely | Ontario’s tax, plus a second city tax in Toronto. First-time buyers may get a refund. |
| Legal fees | $1,500 to $2,500 | Your lawyer or notary handles the transfer and the mortgage. |
| Home inspection | $400 to $700 | Optional, but strongly recommended. |
| Title insurance | $200 to $400 | Often arranged by your lawyer. |
| Adjustments | Varies | Property tax or condo fees the seller already paid. |
Many Ontario buyers set aside 1.5% to 4% of the price for closing costs, more in Toronto because of the second land transfer tax.
Putting it together
Here’s how the numbers come together on a $600,000 home with the minimum down payment.
Mistakes first-time buyers make
The most common one is shopping before being pre-approved, then falling for a home outside your budget. The second is forgetting closing costs. Buyers often save exactly the down payment and then have to scramble for land transfer tax and legal fees.
Between your pre-approval and closing, avoid big changes. A new car loan, a new credit card or a change of job can all affect your approval, even after an offer is accepted.
Common questions
How much do I need for a down payment?
Can I use my FHSA and RRSP together?
Should I get pre-approved first?
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