Buying your first home is one of the biggest financial decisions of your life — and Canada's mortgage rules are uniquely complex. This guide walks you through every step, using plain language and current 2026 rules.
1. How Much Can You Afford?
Before you start house hunting, you need a realistic sense of your budget. Canadian lenders use two key ratios:
- GDS (Gross Debt Service): Your housing costs (mortgage payment, property tax, heating, and 50% of condo fees) cannot exceed 39% of your gross monthly income.
- TDS (Total Debt Service): All your debt payments (housing + car + credit cards + loans) cannot exceed 44% of your gross monthly income.
2. Down Payment Rules
Canada has tiered minimum down payment requirements based on purchase price:
| Purchase Price | Minimum Down Payment | CMHC Insurance |
|---|---|---|
| Under $500,000 | 5% | Required |
| $500,000 – $999,999 | 5% on first $500K + 10% on remainder | Required |
| $1,000,000 and above | 20% | Not available |
3. First-Time Buyer Incentives
Canada offers several programs to help first-time buyers accumulate a down payment or reduce their tax burden.
First Home Savings Account (FHSA)
Launched in 2023, the FHSA is the best registered account available to first-time buyers:
- Contribute up to $8,000/year (lifetime max: $40,000)
- Contributions are tax-deductible (like an RRSP)
- Withdrawals for a qualifying home are completely tax-free (like a TFSA)
- Unused room carries forward by 1 year
Home Buyers' Plan (HBP)
The HBP lets you withdraw up to $60,000 from your RRSP (increased in Budget 2024) for a first home purchase — tax-free at time of withdrawal, but must be repaid over 15 years.
Land Transfer Tax Rebates
Ontario first-time buyers receive a rebate of up to $4,000 on the provincial Land Transfer Tax, and up to $4,475 on the Toronto Municipal Land Transfer Tax. BC offers a rebate on homes under $835,000 (2026 threshold).
4. The Mortgage Stress Test
The federal B-20 stress test requires all insured and most uninsured mortgage applicants to qualify at the greater of their contract rate + 2%, or 5.25%.
This means if you're getting a rate of 4.19%, you must prove you can afford payments at 6.19%. This reduces your qualifying amount by approximately 20% compared to what you'd qualify for at your actual rate.
5. Getting Pre-Approved
A mortgage pre-approval is a conditional commitment from a lender specifying:
- The maximum amount they will lend you
- The interest rate they are holding for you
- The conditions you must meet (employment verification, appraisal, etc.)
A pre-approval typically requires: 2 years T4s or tax returns, recent pay stubs, 3 months bank statements, and government ID. With Nordaux, you can get a pre-approval from multiple lenders simultaneously with a single application.
Takes 5 minutes. No credit impact at this stage.
6. CMHC Insurance Explained
If your down payment is less than 20%, you are required to purchase mortgage default insurance (commonly called CMHC insurance). The premium is added to your mortgage balance:
| LTV Ratio | Down Payment | CMHC Premium |
|---|---|---|
| 95% | 5% | 4.00% |
| 90% | 10% | 3.10% |
| 85% | 15% | 2.80% |
| 80% | 20% | None |
The CMHC premium is charged on the insured mortgage amount and added to your balance. Example: $450,000 purchase with 5% down ($22,500) → $427,500 mortgage × 4.00% = $17,100 CMHC premium → Total mortgage: $444,600.
7. Understanding Your Mortgage
Fixed vs. Variable Rate
A fixed rate stays the same for your entire term (typically 1–5 years). A variable rate moves up and down with the Bank of Canada's overnight rate, expressed as "Prime ± X%."
As of March 2026, best 5-year fixed rates are at 4.19%, while variable rates are around 3.80%. Fixed rates are competitive and offer certainty — particularly appropriate for first-time buyers who need predictable payments.
Term vs. Amortization
- Amortization: The full repayment period — typically 25 years in Canada.
- Term: How long your rate and mortgage contract are in place before you must renew — typically 1–5 years.
8. Closing Costs Checklist
Budget 1.5% to 4% of the purchase price for closing costs, on top of your down payment:
- ✅ Land Transfer Tax — varies by province. Ontario: approx. $12,950 on a $750K home.
- ✅ Legal fees — $1,500–$2,500 for a real estate lawyer
- ✅ Home inspection — $400–$600
- ✅ Title insurance — ~$300
- ✅ Adjustments — reimbursing the seller for prepaid property taxes
- ✅ Moving costs — $1,500–$5,000
- ✍ Toronto buyers add: Municipal LTT ~$9,075 on a $750K home (minus FTB rebate)
9. Making an Offer
Once you find a home you love, your realtor will prepare an Agreement of Purchase and Sale. Key terms to understand:
- Conditions: Financing condition (typically 3–5 business days) and home inspection condition protect you.
- Deposit: Typically 5% of purchase price, payable within 24 hours of offer acceptance.
- Closing date: Usually 30–90 days after acceptance — must align with your rate hold expiry.
10. Your Next Steps
AI-generated content. This article was produced with AI assistance and reviewed for general accuracy. It is for informational purposes only and does not constitute financial, mortgage, or legal advice. Always consult a licensed mortgage professional before making any financial decisions.