Buying your first home is exciting and the mortgage process can feel overwhelming. If you're a first time home buyer Canada, this guide explains mortgage basics, government programs, and practical steps to help you buy a home in Canada with more confidence.
What this guide covers
Mortgage basics (types, terms, amortization)
Steps to get pre-approved and close
Government programs and tax credits for first-time buyers
Typical costs and documents you'll need
Tips to compare lenders and protect your purchase
Mortgage basics — the foundation
1. Key mortgage terms
Mortgage term — length of your interest rate commitment (commonly 1–5 years).
Amortization — total time to fully repay the loan (commonly 25 years for high-ratio insured mortgages).
High-ratio mortgage — when your down payment is less than 20%, mortgage default insurance is required.
Fixed vs variable rate — fixed: interest rate stays the same for the term; variable: rate can change with market rates.
Closed vs open mortgage — closed limits prepayments but usually has lower rates; open allows full prepayment with little or no penalty.
2. How mortgage qualification works
Income and debt matter: lenders calculate your Gross Debt Service (GDS) and Total Debt Service (TDS) ratios to qualify you.
Mortgage stress test: lenders must use the greater of the Bank of Canada five-year benchmark rate or your contract rate plus 2% when assessing your ability to pay. This ensures affordability if rates rise.
Credit score and employment history are critical. A higher score gets better rates.
Down payment and mortgage insurance
Minimum down payment:
5% for homes up to $500,000.
5% on the first $500,000 and 10% on the portion between $500,000–$999,999.
20% for homes $1,000,000 or more (to avoid mortgage default insurance).
Mortgage default insurance (CMHC, Sagen, Canada Guaranty) is mandatory when down payment <20%. The premium depends on the down payment percentage and can be added to the mortgage.
Amortization limits: insured high-ratio mortgages are subject to maximum amortization rules (commonly 25 years) — check current rules with mortgage insurers.
For more on insured mortgages and down payments, see the Canada Mortgage and Housing Corporation (CMHC) resources.
Government programs and tax breaks for first-time home buyers
Home Buyers' Plan (HBP): Allows you to withdraw up to $35,000 from your RRSP (each spouse eligible) to buy or build a qualifying home. Withdrawals must be repaid to your RRSP within 15 years. See CRA's HBP details at the Canada Revenue Agency.
First-Time Home Buyer Incentive: A shared-equity mortgage with the Government of Canada that lowers mortgage payments. Eligibility includes household income and property price limits. See the Government of Canada's First-Time Home Buyer Incentive page for current rules.
Home Buyers' Amount (first-time home buyers' tax credit): A non-refundable tax credit that reduces income tax payable for qualifying first-time buyers. See CRA's page on the Home Buyers' Amount.
Provincial rebates: Some provinces/territories offer land transfer tax rebates or exemptions for first-time buyers (e.g., Ontario, British Columbia). Check your provincial government website.
Helpful links:
Step-by-step: How to buy your first home (mortgage-focused)
Check your credit and finances
Action: Order your credit report, calculate monthly income and non-mortgage debts.
Why: Lenders use this to set your pre-approval amount.
Save for down payment and closing costs
Checklist: down payment, closing costs (legal fees, land transfer tax), inspection fees, moving costs, emergency buffer.
Get pre-approved
Action: Submit pay stubs, employment letter, notice of assessment, bank statements.
Benefit: A mortgage pre-approval shows sellers you're serious and locks a rate for a period.
Work with a real estate agent and shop for homes
Action: Focus on neighbourhoods, property taxes, transit and resale potential.
Make an offer and negotiate conditions
Tip: Include a financing condition (subject to mortgage approval) and a home inspection condition.
Finalize mortgage and close
Action: Your lender arranges appraisal, finalizes mortgage documents, and funds at closing.
Comparing mortgage options — quick checklist
Fixed vs variable: stability vs potentially lower initial cost.
Rate vs fees: Some lenders offer lower teaser rates but higher penalties or fees.
Portability: Can you transfer your mortgage if you sell before term ends?
Prepayment privileges: How much extra can you repay annually without penalty?
Penalties for breaking term: Important if you may refinance early.
Typical closing costs (budget 1.5–4% of purchase price)
Legal fees and title insurance
Land transfer tax (may be rebated for first-time buyers in some provinces)
Home inspection and appraisal
Property insurance and mortgage insurance (if applicable)
Adjustments for property taxes/utilities
Documents lenders typically require
Photo ID
Recent pay stubs or T4s
Two most recent Notice of Assessment from CRA
Bank statements (3–6 months)
Proof of down payment source (savings, gifted funds, RRSP HBP)
Purchase agreement (when available)
For RRSP withdrawal via the Home Buyers' Plan, check your RRSP account and CRA My Account for filing details.
Helpful tool: FCAC mortgage calculators and guides to estimate payments.
Common mistakes first-time buyers make (and how to avoid them)
Stretching finances too thin — use the stress-test to plan conservatively.
Skipping a home inspection — get one even for newer homes.
Ignoring total costs of ownership — property taxes, maintenance and insurance add up.
Not comparing multiple lenders — shop rates, but compare total cost including fees and privileges.
Final tips and next steps
Ask about prepayment options and penalties before signing the mortgage.
Keep emergency savings of 3–6 months of expenses after closing.
Consider professional advice: a mortgage broker can compare options; a lawyer handles closing.
Stay informed: rules and incentives change — rely on official sources (CMHC, CRA, Government of Canada) for current details.
Useful pages: