First-Time Home Buyer — Ontario Playbook

Down Payment Rules for Ontario First-Time Buyers

Minimum down payment in Canada is tiered by purchase price:

5% on the first $500,000
10% on the $500,001–$1,500,000 portion
20% minimum on anything above $1,500,000

As of December 2024, the insured mortgage cap was raised from $1,000,000 to $1,500,000 — meaning CMHC insurance is now available on purchases up to $1.5M with less than 20% down.

GTA examples:

$600,000 purchase: $25,000 (5% on first $500K) + $10,000 (10% on $100K) = $35,000 minimum

$800,000 purchase: $25,000 + $30,000 (10% on $300K) = $55,000 minimum

$1,200,000 purchase: $25,000 + $70,000 (10% on $700K) = $95,000 minimum

Under 20% down triggers CMHC mortgage default insurance — a premium of 2.8%–4.0% added to your mortgage balance. You don’t pay this upfront, but Ontario charges 8% PST on the premium and that IS paid in cash at closing.

CMHC premium tiers:

• 5%–9.99% down: 4.00% of mortgage amount
• 10%–14.99% down: 3.10% of mortgage amount
• 15%–19.99% down: 2.80% of mortgage amount

Example: $800,000 purchase, 10% down ($80,000). Mortgage: $720,000. CMHC premium: $720,000 × 3.10% = $22,320 added to your mortgage. PST on CMHC: $22,320 × 8% = $1,786 in cash at closing.

Don’t stretch for 20% if it means arriving at closing with no emergency fund. The CMHC premium increases your monthly payment modestly — it doesn’t change the math enough to be worth draining your savings entirely.

FHSA — The Best Account You’re Not Using

The First Home Savings Account is the most powerful savings tool ever created for Canadian first-time buyers. It combines the best features of an RRSP and a TFSA in one account built specifically for home purchase.

Contributions are tax-deductible — like an RRSP. At Ontario’s 43% marginal rate, a $8,000 contribution returns approximately $3,440 at tax time.

Withdrawals for a qualifying home are completely tax-free — like a TFSA. No repayment required.

The key numbers:

• Annual contribution limit: $8,000
• Lifetime contribution limit: $40,000 per person
• Carry-forward room: one year of unused room carries forward
• Age restriction: you must be under 40 when you open the account
• Minimum account age: must be open for at least one calendar year before a qualifying withdrawal

The two-person advantage: If you and your partner both qualify as first-time buyers and both open FHSAs, you have $80,000 in combined contribution room. At 43% marginal rate, maximizing both accounts over five years generates approximately $34,400 in combined tax refunds — before you’ve even bought anything.

The single most important action you can take today: Open your FHSA immediately. Even if you can’t contribute yet. Contribution room starts accumulating from the date the account is opened — not from when you first deposit money. A buyer who opens their FHSA three years before purchasing versus one year before has $16,000 more in contribution room. That’s not recoverable.

Home Buyers’ Plan (HBP)

The HBP allows first-time buyers to withdraw up to $60,000 per person from their existing RRSP tax-free for a home purchase. The limit was increased from $35,000 in the 2024 federal budget. For a two-person household where both qualify: $120,000 combined.

Key difference from FHSA — repayment is required. Starting two years after the year of withdrawal, you must repay 1/15th of the withdrawn amount back into your RRSP annually. On a $60,000 withdrawal: $4,000/year for 15 years. Miss a year — that amount is added to your taxable income.

The 90-day rule: RRSP funds must be on deposit for at least 90 days before you withdraw under the HBP. Plan contributions accordingly — January or February RRSP contributions work for a spring closing.

FHSA is better if: You’re starting from zero savings. No repayment obligation means the money stays in your pocket permanently.

HBP is better if: You already have substantial RRSP savings that would otherwise sit untouched until retirement. It accelerates their use for a real asset.

Most important: They are not mutually exclusive. You can use both for the same home purchase.

How to Stack FHSA + HBP Together — The Correct Sequence

Most Ontario first-time buyers know about one of these programs. Very few use both optimally. Here’s the correct order:

Step 1: Exhaust the FHSA first. Withdraw FHSA funds before touching your RRSP via HBP. FHSA withdrawals require no repayment. HBP withdrawals do. Access the same tax-free benefit with the least obligation first.

Step 2: Use HBP for the remaining gap. If your FHSA balance covers part of your down payment target, use the HBP to fill the rest. You can structure the HBP withdrawal to be exactly what you need — you don’t have to withdraw the full $60,000.

Step 3: Claim the HBTC on your taxes. The Home Buyers’ Amount is a $10,000 federal non-refundable tax credit worth $1,500 in tax savings. Claim it on your return for the year you purchased. No action required before closing — just include it at tax time.

Combined potential per person:

• FHSA: $40,000 (lifetime maximum, tax-free out)
• HBP: $60,000 (tax-free out, repayable over 15 years)
• Total tax-advantaged funds: $100,000 per person / $200,000 per couple

Land Transfer Tax Rebates — Up to $8,475 in Savings

Ontario’s land transfer tax is one of the largest closing costs for any GTA buyer. First-time buyers receive meaningful relief — but there are important distinctions most guides miss.

Ontario provincial LTT rebate: Up to $4,000. Eliminates provincial LTT entirely on homes up to approximately $368,000. On higher-priced homes, the rebate is still $4,000 — it just doesn’t cover the full bill.

Toronto Municipal LTT rebate: Up to $4,475. Only applies within the City of Toronto geographic boundary. Vaughan, Mississauga, Brampton, Markham, Richmond Hill, Oakville — no MLTT, therefore no MLTT rebate.

Combined maximum for Toronto first-time buyers: $8,475

The lifetime eligibility rule — critical distinction:
The Ontario and Toronto LTT rebates require you have never owned a home anywhere in the world — not just in Canada, not just in the last four years. This is stricter than the FHSA and HBP eligibility, which use a four-year lookback. You may qualify for FHSA/HBP again after four years out of homeownership — but the LTT rebate is a once-in-a-lifetime opportunity.

Buying with a partner who has previously owned?
The LTT rebate is based on your individual ownership history. If you’ve never owned, you can claim a partial rebate proportional to your ownership share on title. Your lawyer handles this at closing — confirm they’re applying it.

Important: Some buyers discover the rebate months after closing. Your real estate lawyer must claim it at registration. Confirm this with them before closing day. The 18-month window to reclaim it post-closing exists but requires extra effort.

The Stress Test — What It Actually Means for You

OSFI’s B-20 guideline requires every buyer at a federally regulated lender to qualify at the greater of their contract rate + 2%, or 5.25%. At today’s ~4.79% broker rate, you’re qualifying at 6.79%.

What feels like a 4.79% mortgage gets underwritten as a 6.79% one. Your actual payment is based on 4.79% — but the lender checks that you could still handle payments at 6.79%.

Practical impact on maximum mortgage:

Household Income	Qualifies at 4.79%	Qualifies at 6.79% (stress test)	Difference
$80,000	~$460,000	~$370,000	−$90,000
$100,000	~$580,000	~$465,000	−$115,000
$130,000	~$755,000	~$605,000	−$150,000
$160,000	~$930,000	~$745,000	−$185,000

Assumes 10% down, no significant other debt, property tax at 0.85%

Existing debt makes this worse. Lenders count 3% of your credit card balance as a monthly debt — even if you pay in full. A $15,000 credit card balance = $450/month in debt service = approximately $71,000 less in qualifying mortgage. Pay off revolving debt before applying.

The credit union exception: Provincial credit unions are not subject to B-20. They qualify borrowers at their actual contract rate — not at contract + 2%. This can meaningfully increase your maximum purchase price. Ask me whether a credit union is the right fit for your file.

Use the Maximum Mortgage Calculator to see exactly what you qualify for after the stress test.

30-Year Amortization — What Changed in December 2024

As of December 15, 2024, all first-time buyers can access 30-year amortization on CMHC-insured mortgages — for both resale and newly constructed homes. This was a significant expansion from the previous rule that limited 30-year insured amortization to new builds only.

What the payment difference looks like:

On a $640,000 mortgage at 4.79%:

• 25-year amortization: $3,650/month
• 30-year amortization: $3,340/month
• Monthly savings: $310

The trade-off is real: 30-year amortization costs significantly more in total interest over the life of the mortgage. On the same $640,000 mortgage, the 30-year option costs approximately $78,000 more in interest over the full term compared to 25 years.

When 30-year makes sense: If the lower payment is the difference between the purchase fitting your budget and not fitting it — use 30 years. You can always make prepayments to accelerate paydown when cash flow improves. The flexibility has value.

When to stick with 25 years: If you can comfortably carry the 25-year payment, the lower total interest cost is the better long-term outcome.

Run both scenarios in the Mortgage Payment Calculator before deciding.

Pre-Approval vs. Commitment Letter — Know the Difference

These are not the same thing, and confusing them is expensive.

Pre-Approval:
A soft assessment based on your income and credit — not tied to a specific property. Establishes your maximum purchase price and locks in today’s rate for 90–120 days. Not binding on the lender. Gives you a real budget number to shop with.

Get this before you start seriously looking. Without it, you’re shopping blind.

Commitment Letter:
Issued after you have a specific property under an accepted offer. This is the lender’s binding agreement to fund your mortgage, subject to stated conditions. Typical conditions: employment confirmation, property appraisal, title search, FHSA/HBP documentation.

Standard timeline: commitment letter within 3–5 business days of a clean accepted offer.

Financing Condition:
Your offer should always include a financing condition — typically 5–7 business days. This gives you time to receive your commitment letter, satisfy the lender’s conditions, and ensure the deal is fundable before you go firm.

Do not waive your financing condition without a firm commitment letter in hand. In 2026’s market — with more inventory than 2021 — there is rarely a reason to waive conditions.

Closing Cost Planning — The Cash You Need Beyond the Down Payment

Budget 1.5%–4% of your purchase price in closing costs on top of your down payment. On an $800,000 purchase in Toronto, that’s $32,000–$64,000 beyond the down payment — a number that surprises most first-time buyers.

Complete closing cost breakdown:

Item	Typical Range	Notes
Ontario LTT	Calculated	Minus first-time buyer rebate up to $4,000
Toronto MLTT	Calculated	City of Toronto only — minus rebate up to $4,475
Legal fees	$1,500–$2,500	Title transfer and mortgage registration
Title insurance	$200–$400	Standard on all Ontario purchases
Home inspection	$400–$700	Never skip this
PST on CMHC	Calculated	8% of CMHC premium — cash at closing
Property tax adjustment	$500–$2,000	Reimburse seller for prepaid taxes
Utility adjustments	$200–$500	Condo fees, utilities prepaid by seller
Moving costs	$1,200–$5,000	Variable

Real example — $750,000 in Vaughan, first-time buyer, 10% down:

• Down payment: $75,000
• Ontario LTT after $4,000 rebate: $6,475
• Legal fees: $2,000
• Title insurance: $350
• Home inspection: $500
• CMHC PST: $1,674
• Property tax adjustment: $1,200
• Total cash needed at closing: ~$87,200

Same purchase in Toronto — add Toronto MLTT after $4,475 rebate: $5,500
Total cash needed at closing: ~$92,700

Use the Closing Cost Calculator and Purchase All-In Calculator to model your specific scenario.

The Most Expensive Mistakes Ontario First-Time Buyers Make

1. Not opening the FHSA early enough.
Contribution room accumulates from the date the account is opened. A buyer who opens their FHSA one year before purchasing versus three years before loses $16,000 in contribution room — and potentially $6,880 in tax refunds. Open it today.

2. Not planning for closing costs.
Budgeting only for the down payment and arriving at closing short on funds. Plan for down payment + 2%–4% of purchase price for closing costs as separate line items from day one.

3. Taking the first mortgage offered.
50–80 basis points difference between a bank’s posted rate and a broker’s negotiated rate is $8,000–$20,000 over 5 years. One phone call costs nothing.

4. Budgeting at the contract rate, not the stress test rate.
You don’t qualify for what you can afford at 4.79% — you qualify for what you can afford at 6.79%. Run your numbers against the stress-tested rate from the start.

5. Waiving the financing condition.
In 2026’s more balanced market, most sellers will accept a conditional offer. The $500 inspection and 5-day financing condition protect you against outcomes that can cost tens of thousands of dollars.

6. Making major purchases during the application process.
New car, new credit card, financed furniture — all of these show up in your credit file and can reduce your qualification or kill an approval mid-process. Nothing major until after closing.

7. Assuming FHSA and HBP are mutually exclusive.
They stack. Use both if you can. Most Ontario first-time buyers with any RRSP savings should be using both programs for the same purchase.

8. Referencing outdated programs.
The CMHC First-Time Home Buyer Incentive — the shared-equity loan program — was discontinued on March 31, 2024. Any guide still referencing it is out of date. It is no longer available.