First-Time Home Buyer Mortgages
The short version
A first-time buyer in Ontario needs a minimum of five percent down on the first $500,000 of the purchase price and ten percent on the portion above that, with twenty percent required once the price reaches $1.5 million. Anything under twenty percent requires mortgage default insurance, which is added to the loan. On top of the down payment, budget roughly one and a half to four percent of the price for closing costs, most of it land transfer tax. Several programs exist specifically for you: the Home Buyers Plan, the First Home Savings Account, and land transfer tax rebates in both Ontario and Toronto. Lenders assess you on income, credit, debts and down payment, then test the whole thing at the federal stress test rate. Approvals are on approved credit.
What do you actually need for a down payment?
The minimum is tiered rather than a single percentage, and most buyers only know the first number. The full breakdown is in the table further down this page.
The part worth understanding is what happens at the thresholds. Crossing $500,000 raises the required percentage on everything above it. Crossing $1.5 million removes default insurance altogether and takes the minimum to twenty percent, which is a far larger jump in cash than the price difference suggests. A home listed slightly over either line can cost considerably more to buy than one slightly under it.
Wherever the money comes from, the lender must see a ninety day history of it. A deposit that appeared last week will be questioned. Gifted money needs a signed letter from an immediate family member confirming it is a gift and not a loan.
How does mortgage default insurance work?
Put down less than twenty percent and the lender requires insurance protecting them, not you, in the event you default. You pay the premium. It is calculated as a percentage of the mortgage, rises as your down payment shrinks, and is added to the mortgage balance rather than paid at closing.
The part buyers miss is the provincial sales tax on that premium, which cannot be added to the mortgage and is due in cash on closing day. It is not enormous, but it catches people who have budgeted to the last dollar.
Insured mortgages usually carry a better rate than uninsured ones, which surprises people. The lender is taking less risk, so they price accordingly. Putting twenty percent down to avoid the premium is not automatically the cheaper path, and the comparison is worth running properly.
Which program should you use first?
There are four, they stack, and every figure is set out in full further down this page. The more useful question is the order to use them in, because that is where people leave money behind.
Fill the First Home Savings Account first. It is the only one that gives you the deduction on the way in and the tax free withdrawal on the way out, and nothing is ever repaid. If you are more than a year from buying, every dollar should go here before it goes anywhere else.
Use the Home Buyers Plan second. It is not free money. It is your own RRSP, and you owe it back over fifteen years starting the second year after you withdraw. Miss a scheduled repayment and that year's amount is added to your taxable income. Still worth using, provided you go in understanding it is a loan to yourself rather than a windfall.
The rebates and the credit need no planning. They arrive automatically, but only if the right person knows about them. The land transfer tax rebates are claimed by your lawyer at closing, so tell them you are a first-time buyer well beforehand, and the tax credit goes on the return for the year you buy.
One warning about opening an FHSA: you must open it before you buy for it to be any use, and the contribution room only begins accumulating once the account exists. Opening one costs nothing and starts the clock, which is the single cheapest thing a future buyer can do today.
If you are buying a newly built home, there is a fifth program and it dwarfs the others. Since 2025 the federal government refunds the entire GST to first-time buyers on a new home priced up to $1 million, which is worth up to $50,000, with the rebate shrinking to nothing at $1.5 million. It applies to agreements signed with a builder on or after 20 March 2025. Ontario has now matched it with a temporary rebate of the full provincial portion of HST, worth up to $80,000, on agreements signed between 1 April 2026 and 31 March 2027. Together that is up to $130,000 back on a new home, and the Ontario portion is open to any buyer using the home as their principal residence, not only first timers. None of it applies to a resale home, which is the single biggest reason a new build can now cost materially less than the sticker price suggests. Your lawyer and the builder handle the claim, but confirm both are being applied before you sign.
What will closing cost you?
Roughly one and a half to four percent of the purchase price, and the range is wide because land transfer tax dominates it. Ontario charges on a sliding scale. The City of Toronto charges its own on top, so an identical home inside city limits costs meaningfully more to close than one in Mississauga or Vaughan.
Beyond that: legal fees and disbursements, title insurance, an appraisal where the lender requires one, a home inspection if you order one, and adjustments reimbursing the seller for property tax or utilities they have prepaid. Our calculators fold land transfer tax and the first-time buyer rebates into the funds needed figure, so you can see the real cash requirement rather than just the down payment.
What do lenders check?
Income you can prove, your existing debts, your credit history, and the source of your down payment. Those four feed two ratios. Gross Debt Service measures housing costs against income. Total Debt Service adds every other payment you make. On insured files the maximums are thirty nine and forty four percent, and both have to pass.
All of it is then tested at the federal stress test rate, the greater of your contract rate plus two percent or the 5.25 percent floor. That is why the mortgage you qualify for is smaller than the payment you could comfortably manage. Our pre-approval page covers the process in detail.
Where first-time buyers get caught out
- Budgeting the down payment and forgetting the closing costs. The single most common problem we see, and the most avoidable.
- Financing furniture or a car before closing. New debt between approval and funding changes your ratios and can undo the approval entirely.
- Waiving the financing condition to win a bidding war. Understandable in a competitive market, and genuinely risky if the appraisal comes in under the purchase price.
- Assuming pre-qualified means pre-approved. If nobody asked for your documents, no lender has committed to anything.
- Choosing purely on rate. The prepayment penalty, the portability terms and the prepayment privileges matter enormously if life changes during the term, and they vary far more than rates do.
Every program you can claim
Five of them, and they stack. Two are ways of saving your own money more efficiently. Three are money you simply keep, and the largest of those applies only if you buy a newly built home.
$40,000 lifetime
First Home Savings Account
Contribute up to $8,000 a year. Contributions are deductible like an RRSP and qualifying withdrawals are not taxed like a TFSA. Nothing is ever repaid, which is what makes it the strongest of the four.
$60,000 per person
Home Buyers' Plan
Withdraw from your RRSP tax free toward a first home, or $120,000 between two buyers. Funds must have sat in the account at least ninety days. You repay your RRSP over fifteen years.
Up to $8,475
Land transfer tax rebates
Up to $4,000 back on the Ontario tax, plus up to $4,475 on the Toronto municipal tax if the property is in the city. Your lawyer claims both at closing. This is money you keep.
Up to $1,400
First-Time Home Buyers' Tax Credit
A federal non-refundable credit on a $10,000 claim amount, taken on the tax return for the year you buy. Small next to the others, and routinely forgotten.
Up to $130,000 on a new build
GST and HST rebates on a new home
Buying newly built? The federal government now refunds all of the GST for first-time buyers on new homes up to $1 million, up to $50,000. Ontario is refunding the full provincial portion of HST as well, up to $80,000, for agreements signed by 31 March 2027. Resale homes do not qualify.
What a couple can assemble
Two first-time buyers using the four universal programs to their maximum. The totals are worth seeing together, as long as you read what each one actually is. A new build adds the GST and HST rebates on top.
- FHSA, two accounts
- $80,000your own savings, tax sheltered
- Home Buyers Plan, two
- $120,000your own RRSP, repaid over 15 years
- Land transfer tax rebates
- $8,475yours to keep
- Tax credit
- $1,400yours to keep
Be careful with that total. Only the bottom two lines, just under $10,000, are money you keep. The other $200,000 is your own savings being moved tax efficiently, and $120,000 of it has to go back into your RRSP over fifteen years. That is still a substantial advantage, and it is not a grant. Anyone presenting the combined figure as a benefit is selling you something. The one exception is a newly built home, where the GST and HST rebates genuinely are money you keep, and can be worth far more than everything above combined.
Minimum down payment by purchase price
The minimum is tiered, so the percentage you need depends on where the price sits rather than applying evenly across it.
| Purchase price | Minimum down payment | Worked example | Default insurance |
|---|---|---|---|
| Up to $500,000 | 5% of the purchase price | $25,000 on a $500,000 home | Available |
| $500,001 to $1,499,999 | 5% on the first $500,000, then 10% on the rest | $45,000 on a $700,000 home | Available |
| $1,500,000 and above | 20% minimum | $300,000 on a $1.5M home | Not available |
The $1.5 million threshold replaced the previous $1 million one, so older articles and calculators still show the wrong figure. At $1.5 million and above, default insurance cannot be purchased at all, which is why the minimum jumps to twenty percent rather than rising gradually.
Work out your closing costs
Land transfer tax, legal fees and the rest of what you need in cash on closing day, with first-time buyer rebates applied.
Estimates only, not a rate offer or an approval. Approvals are OAC. See every calculator.
Common questions
How much do I actually need for a down payment in Ontario?
Five percent of the first $500,000 and ten percent of anything above that, up to a purchase price of $1.5 million. At or above $1.5 million you need twenty percent. On a $700,000 home that works out to $45,000. You also need closing costs on top, which most buyers underestimate.
What is mortgage default insurance and do I have to pay it?
If you put down less than twenty percent, the lender requires insurance that protects them if you default. You pay the premium, it is added to your mortgage rather than paid up front, and in Ontario the provincial sales tax on that premium is due at closing in cash. Putting down less is not wrong, it simply costs more over the term.
Can I use my RRSP for the down payment?
Yes, through the Home Buyers Plan. You can withdraw up to $60,000 tax free, or $120,000 as a couple, provided the funds have been in the account for at least ninety days. You repay it to your RRSP over fifteen years. The First Home Savings Account is the other option and it does not need to be repaid at all.
How much are closing costs?
Budget roughly one and a half to four percent of the purchase price. The largest piece in Ontario is land transfer tax, charged twice in the City of Toronto because the municipality levies its own on top of the provincial one. Then legal fees, title insurance, an appraisal if required, and adjustments for prepaid property tax.
Is a longer amortization a good idea?
It lowers the monthly payment and increases the total interest you pay. First-time buyers can access a thirty year amortization on an insured mortgage, which helps with affordability. Whether it is right depends on your plans, and it is a conversation worth having rather than a box to tick.
How soon should I get pre-approved?
Before your first showing. It tells you what you can genuinely spend rather than what a website estimates, protects your rate while you look, and makes your offer credible to a seller.