Buying Your First Home

Buying a home makes financial sense when you plan to stay at least 5–7 years. In shorter timeframes, the transaction costs (closing costs, land transfer tax) often exceed any appreciation.

The down payment is the cash you pay upfront. The rest becomes your mortgage. In Canada, the minimum down payment depends on the purchase price: 5% on the first $500,000, 10% on the portion between $500,000 and $1,499,999, and 20% for homes priced at $1.5 million or more. (The $1.5M cap took effect December 15, 2024 — previously it was $1 million.)

CMHC mortgage insurance (also available through Sagen or Canada Guaranty) is required for down payments under 20%. The premium ranges from 2.8% to 4.0% of the mortgage amount and is typically added to your mortgage balance. On a $400,000 mortgage with 5% down, the insurance premium is about $15,200. Unlike U.S. private mortgage insurance, CMHC insurance protects the lender — not you — and cannot be cancelled early.

A mortgage is a loan secured by your home. If you stop making payments, the lender can foreclose and take the property. Canadian mortgages work differently from American ones: you choose a term (usually 5 years) during which your interest rate is locked in, and an amortization period (typically 25 years) over which the loan is repaid. At the end of each term, you renew your mortgage — potentially at a different rate.

Closing costs are fees paid at the end of the home buying process — typically 1.5–4% of the purchase price. On a $500,000 home, expect $7,500–$20,000 on top of your down payment.

• Land transfer tax (varies by province — Ontario charges 0.5–2.5% on a sliding scale; BC charges property transfer tax of 1–3%)
• Legal fees and disbursements ($1,500–$2,500)
• Title insurance ($300–$500)
• Home inspection ($400–$600)
• Appraisal fee ($300–$500, sometimes covered by lender)
• Property tax adjustment (reimburse seller for prepaid property taxes)
• GST/HST on new construction homes (resale homes are exempt)
• Municipal and provincial-specific taxes (e.g., Welcome Tax in Quebec, additional property transfer tax in Toronto and Vancouver)

In Canada, property taxes and home insurance are typically paid separately by the homeowner — not bundled into your mortgage payment. Some lenders may require you to set up a property tax account with them, but it's not as standard as in the U.S. Budget for these costs on top of your mortgage payment.

1. 1Check your credit and finances — Know your score, GDS/TDS ratios, and what you can realistically afford after the stress test.
2. 2Maximize your FHSA and HBP — Start contributing to your First Home Savings Account early. Plan your RRSP withdrawals under the Home Buyers' Plan.
3. 3Save for down payment + closing costs + 1–2% for moving and initial repairs.
4. 4Get pre-approved from 2–3 lenders (banks, credit unions, or a mortgage broker). Compare rates and terms.
5. 5Find a real estate agent — in Canada, the seller typically pays both the listing and buyer's agent commissions, so their service is generally free to you.
6. 6Shop for homes — be realistic about needs vs. wants. Location and commute matter more than finishes.
7. 7Make an offer — your agent will guide you. Include a financing condition and inspection condition.
8. 8Get a home inspection — never waive this. A $500 inspection can reveal $40,000 in problems.
9. 9Finalize your mortgage — remove conditions, lock in your rate, and submit all required documents promptly.
10. 10Arrange home insurance (required before closing) and set up utilities.
11. 11Final walkthrough the day before closing.
12. 12Closing day: your lawyer handles the document signing and fund transfers. You get the keys!

Official Government Resources