First-Time Home Buyer's Guide
Everything you need to know about buying your first home in Canada — from saving your down payment to getting the keys.
Are You Ready to Buy?
An honest self-assessment before you start house hunting
Real talk from Morty: Buying a home is one of the biggest financial decisions you'll make. Before diving into listings, let's make sure the fundamentals are in place. Click each item below to check it off.
How Much Can You Afford?
Understanding GDS, TDS, and the stress test
Canadian lenders use two key ratios to determine how much you can borrow. These are hard limits — even if a lender wants to approve you, they have regulatory caps to follow.
Gross Debt Service (GDS) ≤ 39%
Your housing costs (mortgage payment + property taxes + heating + 50% of condo fees) divided by your gross monthly income. This ratio must stay at or below 39%.
Total Debt Service (TDS) ≤ 44%
Same as GDS, but adds all other debt payments (car loans, student loans, credit card minimums, lines of credit). Must stay at or below 44%.
Morty's pro tip: Just because the bank says you can borrow $600K doesn't mean you should. Leave room in your budget for life — vacations, savings, and the occasional splurge. Morty recommends keeping your housing costs under 30% of take-home pay.
Since 2018, all federally regulated lenders must qualify you at the higher of: your contract rate + 2%, or 5.25% (the "qualifying rate"). This ensures you can still afford payments if rates rise.
For example, if your contract rate is 4.5%, you'd be qualified at 6.5%. This reduces your maximum purchase price by roughly 20% compared to qualifying at the contract rate alone.
The stress test applies to purchases, switches, and renewals at a new lender. Renewals with your existing lender are exempt.
Down Payment & CMHC Insurance
How much to save and when insurance kicks in
Canada's minimum down payment rules are tiered based on the purchase price:
| Purchase Price | Minimum Down Payment | CMHC Insurance? |
|---|---|---|
| Up to $500,000 | 5% of purchase price | Yes — required |
| $500,001 – $999,999 | 5% of first $500K + 10% of remainder | Yes — required |
| $1,000,000+ | 20% of purchase price | Not available — 20% minimum |
Drag the slider below to see how down payment, CMHC insurance, and LTV change with different home prices:
Minimum Down
$25,000
5%
CMHC Insurance
$19,000
4.0% of mortgage
Total Mortgage
$494,000
Principal + insurance
LTV Ratio
95.0%
Insurance required
CMHC insurance protects the lender, not you. It's added to your mortgage balance and amortized over the life of the loan. On a $500K home with 5% down, that's roughly $19,000 added to your mortgage. Saving to 20% eliminates this cost entirely.
Choosing Your Mortgage
Fixed vs. variable, term length, open vs. closed
There's no single "best" mortgage — it depends on your risk tolerance, plans, and market conditions. Here are the key decisions you'll make:
Fixed Rate
Your rate and payment stay the same for the entire term. Predictable and stress-free. Best if you value certainty or expect rates to rise.
Tied to the 5-year Government of Canada bond yield
Variable Rate
Your rate moves with the Bank of Canada's overnight rate (via prime). Historically saves money over time, but your payment can fluctuate.
Tied to the BoC overnight rate → prime rate
Term Length
How long your rate is locked in. Most common is 5 years, but 1–3 year terms exist. Shorter terms usually have lower rates but more renewal risk.
Open vs. Closed
Open mortgages let you repay anytime without penalty (higher rate). Closed mortgages have prepayment restrictions but lower rates. Most first-timers choose closed.
Amortization
The total repayment period. Standard is 25 years (max for insured mortgages). Uninsured can go to 30 years. Longer = lower payments but more interest.
Not sure which to pick? Take the Mortgage Matcher quiz — Morty will recommend the best mortgage type for your situation in 60 seconds. Or check the Rate Radar to see how rates are trending.
Getting Pre-Approved
Lock in your rate and show sellers you're serious
A mortgage pre-approval is a written commitment from a lender stating how much they're willing to lend you and at what rate. It typically locks your rate for 90–120 days. Here's what you'll need:
Government ID
Two pieces (driver's licence, passport)
Proof of income
Recent pay stubs, T4s, or NOA for 2 years
Proof of down payment
Bank statements showing 90-day history
Employment letter
Confirming position, salary, and tenure
Credit check
Lender pulls this — aim for 680+
Debt list
Car loans, student loans, LOC, credit cards
Broker vs. bank? A mortgage broker shops multiple lenders for you (often 30+) at no cost to you. Banks can only offer their own products. For first-time buyers, a broker usually finds better rates and has more flexibility with approval criteria.
The Buying Process
From house hunting to getting the keys — step by step
Get Pre-Approved (1–2 weeks)
Gather your documents, choose a lender or broker, and get your pre-approval letter. This tells you your budget and locks your rate for 90–120 days.
Find a Real Estate Agent
Interview 2–3 buyer's agents. They're typically paid by the seller (via commission), so their service is free to you. Look for someone who knows your target neighbourhoods.
House Hunt & Visit Properties
Set up alerts, attend open houses, and visit shortlisted properties. Pay attention to neighbourhood, commute, schools, and future development plans — not just the house itself.
Make an Offer
Your agent will prepare an Agreement of Purchase and Sale. Key conditions to include: financing (mortgage approval), home inspection, and status certificate review (for condos). You'll also submit a deposit (typically 5% of purchase price) held in trust.
Fulfill Conditions (5–10 business days)
Get the home inspected, finalize your mortgage with the lender, and review the status certificate if applicable. Once all conditions are met (or waived), the deal becomes "firm."
Hire a Real Estate Lawyer
Your lawyer handles title search, registration, mortgage documents, and the closing financial adjustments. Budget $1,500–$3,000 for legal fees.
Final Walkthrough
Visit the property 24–48 hours before closing to verify the condition matches what you bought. Check that agreed-upon appliances and fixtures are present, and there's no new damage.
Closing Day — Get Your Keys!
Your lawyer transfers the funds, registers the title in your name, and hands you the keys. Congratulations — you're officially a homeowner! The whole process from pre-approval to keys typically takes 60–90 days.
Don't skip the home inspection! It costs $400–$700 but can save you tens of thousands by catching foundation cracks, roof issues, knob-and-tube wiring, or mould before you close. Morty has seen too many buyers waive inspections in hot markets and regret it later.
Closing Costs
Budget 1.5%–4% of the purchase price beyond your down payment
The cost nobody warns you about: First-time buyers often focus on the down payment and forget about closing costs. On a $500K home, expect $8,000–$20,000 in additional costs depending on your province. Budget for these separately — they're due on closing day.
| Cost | Typical Range | Notes |
|---|---|---|
| Legal Fees | $1,500 – $3,000 | Lawyer or notary (mandatory) |
| Land Transfer Tax | Varies by province | ON & BC are the highest; some cities add a municipal LTT |
| Title Insurance | $300 – $600 | Protects against ownership disputes |
| Home Inspection | $400 – $700 | Strongly recommended (not mandatory in most provinces) |
| Appraisal Fee | $300 – $500 | Lender may cover this, check first |
| Property Insurance | $800 – $2,500/yr | Required before closing |
| Moving Costs | $500 – $3,000 | Depends on distance and volume |
| Utility Hook-ups | $100 – $300 | Deposits for new accounts |
| PST on CMHC Premium | ~8% of premium | Only in some provinces (ON, QC) |
| Adjustments | Varies | Prepaid property taxes, utility credits from seller |
First-Year Survival Guide
What to expect (and budget for) after you move in
Congratulations on closing! The first year of homeownership comes with its own set of expenses and learning curves. Here's what to prepare for:
Ongoing Monthly Costs
Beyond your mortgage, budget for property taxes (~$200–$500/mo), home insurance (~$100–$200/mo), utilities (~$200–$400/mo), and maintenance (rule of thumb: 1% of home value per year, or ~$400/mo on a $500K home).
Emergency Fund
Keep 3–6 months of expenses in an accessible account. As a homeowner, surprises are inevitable: a broken furnace ($3K–$6K), roof repair ($5K–$15K), or a flooded basement can happen anytime.
Maintenance Calendar
Seasonal tasks: clean gutters (spring/fall), service HVAC (spring/fall), inspect roof and foundation (summer), winterize pipes and check weather stripping (fall). Prevention is always cheaper than repair.
Tax Time
Claim the Home Buyers' Tax Credit ($1,500), track your HBP repayments, and start the moving expense deduction if you relocated 40+ km for work. Keep all receipts from energy-efficiency upgrades — some qualify for provincial rebates.
Morty's 1% rule: Set aside 1% of your home's value each year for maintenance and repairs. On a $500K home, that's $5,000/year or about $415/month. It might feel like a lot, but it adds up fast — and you'll be glad you have it when the hot water tank goes.
Government Programs for First-Time Buyers
Free money and tax breaks you shouldn't miss
Canada has several programs specifically designed to help first-time buyers. Used together, these can save you tens of thousands of dollars. Here's what's available:
First Home Savings Account (FHSA)
Best new tool for savingTax-deductible contributions (up to $8K/year, $40K lifetime) that grow tax-free. Withdrawals for a home purchase are tax-free. Combines the best of RRSP and TFSA.
Official detailsHome Buyers' Plan (HBP)
Up to $60K from RRSPWithdraw up to $60,000 from your RRSP ($120,000 per couple) tax-free for a home purchase. Must repay over 15 years starting the 2nd year after withdrawal.
Official detailsFirst-Time Home Buyers' Tax Credit (HBTC)
$1,500 tax creditA $10,000 non-refundable tax credit, worth up to $1,500 in tax savings. Claim it on your tax return for the year you purchase your first home.
Official detailsGST/HST New Housing Rebate
Rebate on new homesIf buying a new or substantially renovated home under $450,000, you may get a rebate of up to 36% of the GST paid (max ~$6,300 federal portion). Provincial rebates may also apply.
Official detailsLand Transfer Tax Rebates
Province-specific savingsOntario offers up to $4,000 rebate and Toronto up to $4,475 additional rebate for first-time buyers. British Columbia offers exemptions on homes under $835,000. Check your province.
Stack them up! You can use the FHSA, HBP, and HBTC all at the same time. For a couple, that's up to $80K from FHSAs + $120K from RRSPs + $3,000 in tax credits. Start your FHSA now even if you're not buying for a few years — every year of contribution room counts.
Morty's FHSA & RRSP Home Buyers' Super Guide
The definitive deep-dive on FHSA and HBP — contribution rules, tax strategies, interactive calculators, step-by-step instructions, and common mistakes to avoid.
Read the full guide
Your First-Time Buyer Toolkit
Tools to help you through every step
Morty has built a full suite of free tools to help you at every stage of the process. Here are the ones most useful for first-time buyers:
Mortgage Calculator
Calculate payments, amortization, and total interest
Affordability Calculator
Find out your max purchase price based on income
Mortgage Matcher
Find the best mortgage type for your situation
Closing Cost Calculator
Land transfer tax and closing costs by province
Rent vs. Buy Analyzer
30-year projection comparing renting vs. owning
Rate Radar
How mortgage rates work — live data and charts
Mortgage Checklists
Shopping and document checklists with progress tracking
Mortgage Dictionary
Every mortgage term explained in plain language
You've got this! Buying your first home is a big step, but you don't have to figure it all out alone. Bookmark this guide, use the tools above, and come back whenever you need a refresher. Morty's rooting for you.
Ready to Start Your Journey?
Use the mortgage calculator to see what your monthly payments would look like, or take the Mortgage Matcher quiz to find the right mortgage type.
Disclaimer: This guide is for educational purposes only and does not constitute financial, legal, or mortgage advice. Rules, rates, and programs change — always verify current details with your lender, broker, or the Government of Canada. Morty is a mascot, not a licensed mortgage professional.