Canada First-Time Home Buyer Guide: Mortgages, Costs and Steps

Buying your first home is exciting, but it can also feel overwhelming if you don’t know where to begin. This guide walks you through the key steps first-time buyers should take—from determining what you can realistically afford and getting pre-approved for a mortgage to understanding government programs and rebates that may help. If you have questions as you get started, this guide will help you navigate the process.

Cost of buying a home in Canada

Most first-time buyers need to borrow to purchase a home, and there are several upfront and ongoing costs beyond the purchase price. These expenses can add up, so it’s important to plan carefully and budget for known items as well as the unexpected.

The down payment

A down payment is the portion of the purchase price you pay up front. It must come from accessible funds such as savings, a gift from family, or withdrawals from qualifying registered accounts like an FHSA or an RRSP. The minimum amount required depends on the home’s purchase price under federal rules:

Purchase price	Minimum down payment
$500,000 or less	5% of the purchase price
$500,000 to $1.5 million	5% of the first $500,000 + 10% of the portion above $500,000
$1.5 million or more	20% of the purchase price

First-time buyers often have smaller down payments than repeat buyers because they aren’t carrying equity from a previous sale. If your down payment is under 20%, mortgage default insurance (commonly called mortgage loan insurance) will be required and should be included in your budget.

• How large should your down payment be?
• How to invest down payment funds while timing the real estate market

The deposit

The deposit is the portion of your down payment you pay when signing the purchase agreement. It counts toward the down payment but is often non-refundable if you back out before closing. There’s no standard deposit amount in Canada, but 5% of the purchase price is a common guideline. In competitive markets, sellers may request higher deposits; in softer markets they may accept less. Have your deposit funds readily available, as they are typically required within 24 hours of signing the contract.

Closing costs

Closing costs include fees such as legal or notary fees, land transfer tax, GST/HST where applicable, and other administrative charges. These costs typically range from about 1.5% to 4% of the purchase price. You’ll also want to budget for a home inspection, utility hook-ups, prepaid property expenses and any immediate furniture or appliance purchases.

Because closing costs can reduce the funds available from your down payment, plan accordingly. For example, if you’re aiming for a 5% down payment, you may actually need closer to 6.5% of the purchase price in liquid savings to cover upfront expenses and still have a buffer for emergencies. For a home priced around $600,000, emergency savings of $5,000 to $10,000 is a reasonable target.

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First-time home buyer programs and tax rebates

Several federal and provincial programs can help first-time buyers save or access funds for a home purchase. Eligibility rules and benefits vary, so review each program carefully to see which applies to your situation.

The first home savings account (FHSA)

An FHSA is a registered account designed to help first-time buyers save for a down payment. Contributions and withdrawals for an eligible home purchase are tax-free. Individuals can contribute up to $8,000 per year, with a lifetime limit of $40,000, and funds can remain in the account for up to 15 years. After that, the money must be used for a home purchase, transferred to an RRSP, or withdrawn as taxable income.

The Home Buyers’ Plan

The Home Buyers’ Plan (HBP) allows eligible first-time buyers to withdraw up to $60,000 from an RRSP ($120,000 for a qualifying couple) to use toward a down payment. Withdrawals under the HBP must be repaid to the RRSP over a 15-year period to avoid taxation.

The Home Buyers’ Tax Credit

New homeowners may be eligible to claim a non-refundable Home Buyers’ Tax Credit based on a set amount applied on their tax return, which can reduce taxes owed in the year of purchase.

Land transfer tax rebate

Several jurisdictions, including some provinces and a few municipalities, offer land transfer tax rebates to eligible first-time buyers. The amount and eligibility rules differ by location, so check the rules that apply where you’re buying.

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How mortgages work in Canada

What is a mortgage?

A mortgage is a loan used to buy a property. It includes an interest rate, a repayment schedule (amortization) and specific terms. The property serves as security for the loan, which means the lender can take possession if payments are not made.

Key mortgage terms to understand:

• Term: The length of the mortgage contract (commonly from six months to five years or more).
• Amortization: Total time to pay off the mortgage (commonly 5 to 25 years, sometimes longer).
• Interest rate: The cost of borrowing, which together with principal determines your regular payment.
• Open vs. closed: Open mortgages allow prepayment and greater flexibility but usually cost more; closed mortgages limit flexibility but often carry lower rates.
• Fixed vs. variable: Fixed rates remain the same during the term; variable rates can change with market conditions.

Fixed vs. variable mortgage rates

Choose between a fixed or a variable rate depending on your tolerance for rate changes and desire for payment predictability. Fixed rates lock your interest for the term, offering certainty. Variable rates can be lower initially but fluctuate with market conditions, which can change your interest costs over time.

Best mortgage rates available today

Mortgage rates change frequently. Use online comparisons and speak to lenders or brokers to find current fixed and variable rates that suit your needs and down payment level.

Lender vs. mortgage broker

You can apply for a mortgage directly through a bank or credit union, or work with a mortgage broker who accesses multiple lenders. Going directly to your bank is convenient if you already bank there, but a broker can compare more options and may find a better fit for borrowers with unique circumstances, such as self-employment or recent immigration.

• What is a mortgage broker?
• How mortgage brokers are compensated
• Do you need to pay broker fees?

How much can I afford on a mortgage?

Affordability depends on your down payment, income and existing debts. Lenders use Gross Debt Service (GDS) and Total Debt Service (TDS) ratios to estimate what you can carry. GDS compares housing costs (mortgage payments, heating, taxes, condo fees) to gross income; TDS includes those housing costs plus other debt payments. Guidelines vary by institution and government agencies, so use them as a starting point while building a detailed personal budget.

• Mortgage affordability calculator
• Mortgage payment calculator
• Mortgage insurance calculator

Why you should get pre-approved

A mortgage pre-approval confirms how much lenders are willing to loan you based on your income, credit and debts. It helps you shop within your budget and demonstrates to sellers that you are a serious buyer. Pre-approval typically requires documentation such as income verification, credit history and a short review of the source of your down payment funds.

Now, how much can you actually afford?

Pre-approval shows what lenders will offer, but only you can decide what fits your lifestyle. Create a comprehensive monthly budget that includes groceries, childcare, transportation, entertainment and savings goals to avoid becoming “house poor.” Two households with identical incomes may afford very different mortgage payments based on lifestyle and other expenses, so factor those personal costs in before committing.

What is the mortgage stress test?

The mortgage stress test requires lenders to assess whether borrowers could still afford mortgage payments if interest rates rise. Lenders apply a benchmark rate or add a margin to the offered rate (whichever is higher) to determine affordability. The stress test applies to most buyers in Canada and helps protect against future rate increases affecting household finances.

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Tips for first-time home buyers in Canada

Entering today’s market typically requires careful planning and flexibility. Build a savings plan, get pre-approved, compare mortgage options, and consider whether buying is the right choice given your job stability, expected moves and comfort with home maintenance responsibilities.

• Six smart strategies for first-time buyers
• Nine common mistakes first-time buyers make
• How to approach buying in major markets like Toronto and Vancouver

Best places to buy a home in Canada

Look for neighbourhoods that balance price, growth potential and lifestyle. Annual market guides and local real estate rankings can help identify good-value areas based on price trends and neighbourhood characteristics.

Should you buy a home in Canada?

Home ownership offers stability, the potential for long-term appreciation and the freedom to manage your property. But it also comes with responsibilities and costs such as repairs, property taxes and maintenance. If your job is uncertain or you expect to move soon, renting may be the more flexible option. Consider your financial stability, lifestyle preferences and long-term plans when deciding whether to buy.

• Deciding whether to buy or continue renting
• How to build financial security while renting
• Comparing the financial implications of renting versus owning

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