First Time Home Buyer Mortgage in Ontario

Key Takeaways: You can buy a home in Ontario with as little as 5% down. The RRSP Home Buyers’ Plan lets you withdraw up to $60,000 tax-free for your down payment. All buyers must pass the federal stress test, which qualifies you at roughly 2% above your actual rate. A mortgage broker can access dozens of lenders that banks won’t tell you about, often with better rates and more flexible approval guidelines.

Buying your first home in Ontario is exciting, but the mortgage side of things can feel overwhelming when you’ve never done it before. Between down payment rules, government programs, insurance premiums, and the stress test, there’s a lot to sort through. This guide breaks it all down in plain language so you know exactly what to expect.

At Canadian Mortgage Services, we’ve been helping first time buyers across Ontario get approved since 1988. Whether you’re purchasing a condo in Toronto, a townhome in Oshawa, or a detached home in Hamilton, our team will walk you through every step from pre-approval to closing day.

Down Payment Requirements in Ontario

The minimum down payment in Canada depends on the purchase price:

Your down payment can come from personal savings, a gift from an immediate family member (with a signed gift letter), your RRSP through the Home Buyers’ Plan, the First Home Savings Account, or a combination of all of these. Borrowed down payments are allowed in some cases but they affect your debt ratios and may limit your options.

Government Programs for First Time Buyers

RRSP Home Buyers’ Plan (HBP)

The Home Buyers’ Plan lets you withdraw up to $60,000 from your RRSP tax-free to put toward your first home. If you’re buying with a partner who is also a first time buyer, you can each withdraw $60,000 for up to $120,000 combined. The funds must have been in your RRSP for at least 90 days before withdrawal. You repay the amount over 15 years, starting the second year after your purchase.

First Home Savings Account (FHSA)

The FHSA lets you contribute up to $8,000 per year (with a $40,000 lifetime limit) toward your first home. Contributions are tax-deductible, and withdrawals for a qualifying purchase are completely tax-free. Unlike the HBP, you don’t have to pay the money back. You can use both an FHSA and the HBP together for maximum flexibility.

Ontario Land Transfer Tax Rebate

First time buyers in Ontario get a rebate of up to $4,000 on provincial land transfer tax. Buying in Toronto? There’s an additional municipal rebate of up to $4,475. Use our land transfer tax calculator to see your exact amount.

GST/HST New Housing Rebate

Purchasing a newly built home? You may qualify for a rebate on a portion of the HST. The federal portion provides up to $6,300 for homes priced under $450,000, and Ontario provides an additional rebate of up to $24,000.

The Mortgage Stress Test

Every mortgage borrower in Canada must pass the federal stress test. You don’t qualify based on the rate you’ll actually pay. Instead, lenders qualify you at the higher of your contract rate plus 2%, or 5.25%, whichever is greater.

For example, if your actual mortgage rate is 4.49%, the stress test qualifies you at 6.49%. This reduces how much you can borrow compared to what you might expect based on income alone. It’s designed to make sure you can still handle payments if rates rise. Test your own numbers with our affordability calculator.

CMHC Insurance Explained

If your down payment is less than 20%, you’re required to purchase mortgage default insurance. The premium depends on your down payment percentage:

The premium gets added to your mortgage balance and is spread across your regular payments, so you don’t pay it upfront out of pocket. Homes priced over $1,000,000 are not eligible for default insurance, which is why those purchases require at least 20% down.

The Approval Process Step by Step

Step 1: Get pre-approved. Before you start shopping, get a mortgage pre-approval. This tells you how much you can afford and locks in a rate for up to 120 days.

Step 2: Gather your documents. You’ll need recent pay stubs, a letter of employment, your last two years of T4s or Notices of Assessment, bank statements showing your down payment, and valid government ID. Self-employed buyers will need two years of tax returns and financial statements.

Step 3: Find your home and make an offer. Once your offer is accepted (with a financing condition), your broker submits the full application to lenders.

Step 4: Lender review and approval. The lender reviews your income, credit, down payment source, and the property itself. They may order an appraisal. Once everything checks out, you get a firm commitment letter.

Step 5: Closing day. Your lawyer handles the title transfer, registers the mortgage, and makes sure all funds flow properly. You get the keys.

Closing Costs to Budget For

Beyond the down payment, budget 1.5% to 4% of the purchase price for closing costs. On a $600,000 home, that’s roughly $9,000 to $24,000. The main costs include land transfer tax (reduced by the first time buyer rebate), legal fees ($1,500 to $2,500), title insurance ($300 to $500), home inspection ($400 to $600), appraisal fee ($300 to $500, sometimes covered by the lender), and property tax adjustments. Condo buyers should also budget for a status certificate review.

Why Use a Mortgage Broker

Banks only offer their own products. A mortgage broker works with dozens of lenders, including major banks, credit unions, trust companies, and alternative lenders, to find you the best rate and the right fit for your specific situation. This is especially valuable for first time buyers who may have non-traditional income, limited credit history, or a smaller down payment.

Our service is free for most purchase transactions because the lender pays the broker’s fee. You get access to more options, better rates, and a dedicated advisor who works for you. Contact us or call 905-455-5005 to get started.