Frequently Asked Questions

These are the questions we hear most often from Canadian first-time home buyers. Each answer gives you the essentials and points you to the relevant guide module for the full details.

1. How much do I need for a down payment in Canada?

The minimum down payment in Canada is 5% on the first $500,000 of the purchase price and 10% on the portion between $500,000 and $1,499,999. For homes priced at $1,500,000 or more, you need a minimum of 20%. On a $500,000 home, the minimum is $25,000. On a $700,000 home, it is $45,000 ($25,000 on the first $500K + $20,000 on the remaining $200K). If your down payment is less than 20%, you will also pay mortgage default insurance (CMHC insurance), which adds 2.8% to 4.0% of the mortgage amount to your cost. See Down Payment Rules for a complete breakdown.

2. What is the First Home Savings Account (FHSA)?

The FHSA is a registered account that gives you a double tax advantage: your contributions are tax-deductible (reducing your taxable income, like an RRSP), and qualifying withdrawals for a home purchase are completely tax-free (like a TFSA). You can contribute up to $8,000 per year with a lifetime maximum of $40,000. Over five years, a buyer in a 30% tax bracket who maxes out their FHSA will save approximately $12,000 in tax refunds and end up with roughly $44,000 (including investment growth) for their down payment — all tax-free. Even if you are not sure when you will buy, opening an FHSA starts your contribution room clock and creates a no-lose scenario: if you do not buy, you can roll the balance into your RRSP penalty-free. See First Home Savings Account.

3. What is the difference between the FHSA and the RRSP Home Buyers’ Plan?

The FHSA gives you tax-deductible contributions and tax-free withdrawals — and you never have to repay the money. The RRSP Home Buyers’ Plan (HBP) lets you withdraw up to $60,000 from your RRSP tax-free, but you must repay the full amount to your RRSP over 15 years. If you miss a repayment, the missed amount is added to your taxable income for that year. The best strategy for most buyers is to use both — max out your FHSA ($40,000) and use the HBP for additional funds ($60,000), giving you access to up to $100,000 from registered accounts ($200,000 as a couple). See FHSA vs. HBP Combined Strategy.

4. What credit score do I need to buy a home?

Most Canadian lenders require a minimum credit score of 680 for their best rates and terms. Some lenders will approve mortgages with scores as low as 600, but at higher interest rates and with more restrictive conditions. A score of 760 or above generally qualifies you for the most competitive rates available. If your score is below 680, focus on paying down credit card balances (aim to use less than 30% of your available credit), making all payments on time, and avoiding new credit applications for at least six months before applying for a mortgage. See Credit Score.

5. What is the mortgage stress test?

The stress test is a federal requirement that ensures you can afford your mortgage payments at an interest rate higher than your actual rate. You must qualify at the greater of your contracted rate plus 2% or the Bank of Canada’s benchmark qualifying rate (currently 5.25%). For example, if your lender offers you a rate of 4.5%, you must prove you can afford payments at 6.5%. The stress test reduces the maximum mortgage you qualify for by roughly 20% compared to qualifying at your actual rate. It applies to all mortgages from federally regulated lenders, whether you are putting 5% down or 50% down. See The Stress Test.

6. How much are closing costs in Canada?

Budget 3% to 5% of the purchase price for closing costs, on top of your down payment. On a $500,000 home, that means $15,000 to $25,000 in additional cash. The major closing costs include land transfer tax (varies by province — $0 in Alberta to $15,000+ in Toronto), legal fees and disbursements ($1,500 to $2,500), title insurance ($250 to $500), home appraisal ($300 to $500), property tax adjustments, and moving costs. Many first-time buyers underestimate closing costs and are caught off guard at closing. See Closing Costs Overview for a complete breakdown.

7. What is CMHC insurance and do I need it?

CMHC insurance (also called mortgage default insurance) is required when your down payment is less than 20% of the purchase price. It protects the lender — not you — in case you default on your mortgage. The premium is calculated as a percentage of your mortgage amount (2.8% to 4.0%) and is typically added to your mortgage balance. On a $500,000 home with 5% down, the insurance premium is approximately $19,000, added to your $475,000 mortgage. You do not need CMHC insurance if your down payment is 20% or more. Despite the cost, insured mortgages often come with slightly lower interest rates because the lender’s risk is eliminated. See CMHC Insurance.

8. Should I get a fixed or variable rate mortgage?

There is no universally correct answer — it depends on your risk tolerance, financial flexibility, and the current rate environment. Fixed-rate mortgages give you payment certainty for the entire term (typically 5 years); you know exactly what you will pay every month. Variable-rate mortgages are historically lower on average but fluctuate with the Bank of Canada’s policy rate, meaning your costs could rise. If you have a tight budget and would lose sleep over potential rate increases, fixed is the safer choice. If you have financial flexibility and can absorb higher payments, variable has historically saved borrowers money over the long run. Most first-time buyers choose a 5-year fixed term for the predictability. See Fixed vs. Variable.

9. What government programs are available for first-time buyers?

Canada offers several federal programs available to all qualifying first-time buyers: the FHSA (up to $40,000 in tax-advantaged savings), the RRSP Home Buyers’ Plan (up to $60,000 tax-free withdrawal), and the Home Buyers’ Tax Credit ($1,500 non-refundable credit). On top of these, every province has its own programs — Ontario offers land transfer tax rebates up to $4,000 (plus $4,475 in Toronto), BC offers a full property transfer tax exemption on homes up to $500,000, Alberta has no land transfer tax at all, and Quebec’s Montreal offers grants up to $15,000. By stacking federal and provincial programs, a first-time buyer can save $15,000 to $45,000+ depending on their province and situation. See Federal Programs and your province’s page in Module 4.

10. Do I need a real estate lawyer?

Yes. In most Canadian provinces, you are required to use a lawyer (or a notary in BC and Quebec) to complete a real estate transaction. Even if it were optional, a real estate lawyer is one of the best investments you make during the process. Your lawyer reviews the Agreement of Purchase and Sale, conducts a title search, arranges title insurance, calculates closing adjustments, registers the mortgage and title transfer, holds funds in trust, and ensures the seller can actually deliver what they are selling. Legal fees typically run $1,500 to $2,500 including disbursements — a small price for the protection they provide. See Your Real Estate Lawyer.

11. What is land transfer tax?

Land transfer tax is a provincial (and in some cases, municipal) tax you pay when you purchase a property, calculated as a percentage of the purchase price. It is usually your single largest closing cost. Rates vary significantly: Alberta and Saskatchewan charge only modest registration fees, while Ontario charges a tiered tax that can cost $8,475 on a $600,000 home (plus another $8,475 in Toronto’s municipal tax). Most provinces offer first-time buyer rebates that reduce or eliminate the tax — in Ontario, first-time buyers get a rebate of up to $4,000. Your real estate lawyer handles the land transfer tax payment at closing. See Land Transfer Tax.

12. How do I know if I am ready to buy?

You are likely ready to buy if you have: a stable income that can comfortably support mortgage payments plus carrying costs, a credit score of at least 680, enough savings for a down payment and 3-5% of the purchase price in closing costs, an emergency fund of 3-6 months of expenses that you will not deplete for the purchase, and manageable existing debt (student loans, car loans, credit cards). If you meet these criteria but still feel uncertain, that is normal — most first-time buyers feel that way. The key is doing the math honestly and not stretching beyond what you can comfortably afford. See Are You Ready to Buy? and the Financial Readiness Checklist.

13. What is the difference between a condo and a freehold?

A freehold (detached house, semi-detached, or townhouse on its own lot) means you own the building and the land it sits on. You are responsible for all maintenance — roof, driveway, lawn, exterior, structure — but you have full control over your property and pay no condo fees. A condominium means you own your individual unit, but the building’s common elements (lobby, hallways, elevators, parking garage, roof, exterior) are shared with other owners and managed by the condo corporation. You pay monthly condo fees ($300 to $800+ depending on the building and amenities) that cover maintenance of these shared elements, plus the building’s reserve fund. Condos are often more affordable as an entry point but come with less control and the risk of special assessments. See Condo vs. Freehold.

14. Should I use a mortgage broker or go to my bank?

A mortgage broker has access to dozens of lenders (banks, credit unions, monoline lenders) and can shop the market on your behalf. A bank mortgage specialist can only offer that bank’s own products. Brokers can often find rates 0.1% to 0.5% lower than what your bank offers, and they are typically paid by the lender (not by you). That said, some banks offer competitive rates, especially if you have other accounts with them. The best approach is to get a quote from your bank and from a mortgage broker, then compare. A small rate difference — even 0.2% — can save you $5,000 to $10,000 over a five-year term. See Choosing a Mortgage Provider.

15. What happens on closing day?

On closing day, your lawyer transfers the purchase funds (your down payment + the mortgage funds from your lender) to the seller’s lawyer. The seller’s lawyer confirms receipt, releases the keys, and registers the title transfer in your name at the land titles office. In practical terms, you will have signed all mortgage and closing documents a few days before closing. On the day itself, you may not hear from your lawyer until mid-afternoon — the transfer of funds and registration takes time. Once everything is confirmed, your agent or lawyer will let you know the keys are available for pickup (usually from the listing brokerage). You are officially a homeowner. See Closing Day.

16. How much should I budget for home maintenance?

A widely used rule of thumb is to budget 1% of your home’s value per year for maintenance and repairs. On a $500,000 home, that is $5,000 per year (about $415 per month). Some years you will spend less, and some years a major repair (new roof, furnace replacement, plumbing issue) will cost much more. If you are buying an older home, budget closer to 1.5% to 2%. For condos, your condo fees cover exterior and common element maintenance, but you are still responsible for everything inside your unit — appliances, plumbing fixtures, flooring, and so on. Having a dedicated maintenance fund prevents you from going into debt when something inevitably breaks. See Home Maintenance.

17. What is a home inspection and do I need one?

A home inspection is a professional examination of a property’s structure, systems, and components — foundation, roof, plumbing, electrical, HVAC, insulation, and more. It costs $400 to $600 for a typical home and takes two to four hours. The inspector produces a detailed report identifying defects, safety issues, and items nearing end of life. A single major finding (a failing roof, foundation cracks, outdated wiring) can easily cost $10,000 to $50,000+ to fix. Skipping the inspection to be more competitive in a bidding war is a gamble that can cost you far more than you save. If submitting a firm offer, consider a pre-offer inspection for added confidence. See The Home Inspection.

18. Can I buy a home if I am self-employed?

Yes, but the process is more involved. Self-employed buyers typically need to provide two years of tax returns, Notices of Assessment (NOAs), and financial statements to prove their income. Lenders look at your net business income (after expenses), which is often lower than what an employee earns on paper, even if your actual take-home pay is higher. Some lenders offer “stated income” programs for self-employed borrowers who have been in business for at least two years and have strong credit. A mortgage broker is especially valuable for self-employed buyers because they know which lenders have the most flexible criteria for non-traditional income. Start organizing your documents well in advance and consider working with an accountant to present your income in the strongest possible light.

19. What is title insurance?

Title insurance is a one-time policy (typically $250 to $500) that protects you against problems with your property’s legal title — including fraud, forgery, unknown liens, survey errors, unpaid taxes by a previous owner, and building code violations. There are two types: lender’s title insurance (required by most lenders to protect their mortgage) and owner’s title insurance (optional, but strongly recommended to protect you). Title insurance lasts for as long as you own the home and can save you from costly legal disputes if a title problem surfaces after closing. See Title Insurance.

20. When should I start saving for a home?

As soon as you think homeownership might be in your future — even if it is five or more years away. The earlier you start, the more time you have to take advantage of compound growth and tax-advantaged accounts. Open an FHSA immediately (even a $100 contribution starts your annual room clock), set up automatic contributions to your FHSA and TFSA, and aim to save at least 10-15% of your income toward your home fund. A buyer who starts saving $500/month five years before purchasing will have approximately $33,000 to $38,000 (depending on investment returns) — enough for a 5% down payment on a home up to $660,000, plus closing costs. Starting early also gives you time to build your credit score and reduce existing debts. See Saving Timelines.