First-Time Home Buyer Guide (Canada)
You need a down payment (5–20% depending on price), closing costs in cash (1.5–4%, mostly land transfer tax), and to pass the stress test at your rate + 2% or 5.25%, whichever is higher. Lenders cap housing costs near 39% of gross income.
Buying a first home in Canada is mostly a sequence of numbers, and getting them in the right order saves a lot of wasted time. Here's the order that works.
1. Decide whether to buy at all
Before anything else, check that buying beats renting on your timeline. Transaction costs — land transfer tax going in, roughly 5% commission coming out — mean short stays usually favour renting and investing the down payment. Run your numbers through the rent vs buy calculator and find your break-even year.
2. Build the down payment
The FHSA is purpose-built for this: contributions are tax-deductible like an RRSP, and withdrawals for a first home are tax-free like a TFSA, with no repayment. Model it with the FHSA calculator. If you're also weighing a TFSA or the RRSP Home Buyers' Plan, our account comparison covers the trade-offs.
| Purchase price | Minimum down payment |
|---|---|
| Up to $500,000 | 5% |
| $500,000 – $999,999 | 5% of the first $500k + 10% of the rest |
| $1,000,000+ | 20% |
3. Find your real budget
Not what you feel you can afford — what a lender would approve. The affordability calculator applies the same GDS (39%) and TDS (44%) ratios banks use and runs the stress test on top. It also tells you which of the two ratios is capping you, which is usually the thing you can actually fix.
4. Budget the closing costs
This is where first-time buyers get caught. Land transfer tax is due in cash on closing and can't be financed — check yours with the land transfer tax calculator, which also applies first-time buyer rebates. Alberta, Saskatchewan and the territories charge none; Toronto charges it twice.
5. Confirm the payment
With a price and a rate, the mortgage payment calculator shows the monthly figure and the total interest — plus what accelerated bi-weekly payments would save. And before you ever break a fixed term early, check the mortgage penalty calculator; the big-bank posted-rate method can turn a $15,000 penalty into $32,000.
Frequently asked questions
How much do I need for a down payment in Canada?
5% on the first $500,000, 10% on the portion between $500,000 and $1,000,000, and 20% on homes of $1,000,000 or more. On a $700,000 home that's $45,000. Below 20% down you also pay CMHC mortgage default insurance, which is added to your mortgage.
What is the mortgage stress test?
Lenders must confirm you could still afford your payments at the greater of your contract rate plus 2 percentage points, or 5.25%. It reduces how much you can borrow, but protects you against a rate shock at renewal.
What closing costs should I budget for?
Typically 1.5% to 4% of the purchase price: land transfer tax (the biggest, and charged twice in Toronto), legal fees, title insurance, a home inspection, and an adjustment for prepaid property tax. These must be paid in cash — they can't be added to your mortgage.
Should I buy or keep renting?
It depends on how long you'll stay. Buying carries large one-time costs on both ends, so it usually takes several years before ownership beats renting and investing the down payment. Under about five years, renting often wins.
Researching and writing about Canadian personal finance since 2026.
Last reviewed August 2026 · How we research
“First-Time Home Buyer Guide (Canada)” — VaultNerd, https://www.vaultnerd.com/learn/first-time-home-buyer-guide, updated August 2026.
- Government of Canada — minimum down payment rules
- OSFI Guideline B-20 — mortgage stress test
- CMHC — debt service ratio guidelines and mortgage loan insurance