Buying your first home in Ontario is one of the biggest financial decisions of your life. Here is everything you need to know about grants, rebates, stress tests, and how much you really need to save.
Most first time buyers focus only on the down payment — but the true cost of buying a home in Ontario is much higher than most people expect. Beyond the down payment, you need to budget for land transfer tax, legal fees, home inspection, title insurance, and moving costs.
In Ontario, the minimum down payment depends on the purchase price. For homes under $500,000, the minimum is 5%. For homes between $500,000 and $999,999, it is 5% on the first $500,000 and 10% on the remainder. For homes $1 million and above, you need a full 20% down payment.
On a typical $700,000 home in the Greater Toronto Area, your total upfront costs including down payment and closing costs could easily reach $80,000 to $100,000 — a number that shocks many first time buyers who only planned for the down payment.
The good news for Ontario first time buyers is that several government programs can significantly reduce your costs. Understanding these programs before you start shopping can save you tens of thousands of dollars.
The Ontario Land Transfer Tax Rebate provides first time buyers with a rebate of up to $4,000 on provincial land transfer tax. If you are buying in Toronto, the City of Toronto also provides a municipal land transfer tax rebate of up to $4,475. Together these rebates can save you up to $8,475.
The Federal First Home Savings Account (FHSA) introduced in 2023 allows Canadians to save up to $40,000 completely tax free toward their first home. Contributions are tax deductible like an RRSP and withdrawals for a qualifying home purchase are completely tax free like a TFSA — giving you the best of both accounts.
The Home Buyers Plan (HBP) allows first time buyers to withdraw up to $35,000 from their RRSP tax free to use toward a home purchase. If you have a spouse or common law partner, you can each withdraw $35,000 for a combined total of $70,000. You have 15 years to repay the withdrawn amount back into your RRSP.
Every Canadian applying for a mortgage must pass the mortgage stress test — even if you have a 20% down payment and do not need mortgage insurance. The stress test requires you to qualify at the higher of your actual mortgage rate plus 2% or 5.25% — whichever is greater.
In practical terms, if you are offered a mortgage at 5.5%, the bank must verify you can afford payments at 7.5%. This requirement significantly reduces the maximum mortgage amount most Canadians qualify for compared to what they could technically afford at their actual rate.
Ontario's housing market varies dramatically by location. The Greater Toronto Area remains the most expensive market with average home prices above $1 million in many neighbourhoods. However markets like Hamilton, Kitchener-Waterloo, London, and Kingston offer significantly more affordable entry points for first time buyers.
Kitchener-Waterloo in particular has emerged as one of Ontario's fastest growing tech corridors, with Google, Shopify, and dozens of tech companies establishing offices there. Average home prices remain significantly below Toronto while offering strong employment opportunities and quality of life.
Canadian first-time buyers have access to several tax-advantaged tools that, used together, can dramatically accelerate a down payment. Understanding how to stack them is one of the most valuable pieces of financial planning a prospective homeowner can do.
The First Home Savings Account (FHSA), introduced in 2023, is often the best starting point. It allows contributions of up to $8,000 per year to a lifetime maximum of $40,000, with contributions tax-deductible like an RRSP and qualifying withdrawals for a first home completely tax-free like a TFSA. This double tax advantage makes it uniquely powerful for first-time buyers, and the deduction can generate a refund that itself goes toward the down payment.
The RRSP Home Buyers' Plan (HBP) lets you withdraw up to $60,000 from your RRSP for a first home, repayable over 15 years. Unlike the FHSA, the HBP money must be repaid, but it provides additional buying power. A couple buying together can each use their own FHSA and HBP, potentially combining well over $100,000 in tax-advantaged funds. The TFSA rounds out the toolkit: while it offers no deduction, its withdrawals are tax-free and never need repayment, making it flexible for the portion of savings beyond the FHSA and HBP limits.
First-time buyers often focus entirely on the down payment and are caught off guard by the substantial additional costs of closing on a home in Ontario. Budgeting for these from the start prevents a last-minute scramble and ensures you are not left without a financial cushion after closing.
The largest closing cost in Ontario is land transfer tax. Ontario charges a provincial land transfer tax on a sliding scale, and buyers in the City of Toronto pay an additional municipal land transfer tax of similar size. First-time buyers receive rebates — up to $4,000 on the provincial tax and up to $4,475 on the Toronto municipal tax — which can eliminate or sharply reduce the tax on a modestly priced first home, but on higher-priced homes substantial tax still applies.
Other closing costs include legal fees and disbursements, title insurance, a home inspection, and a property appraisal if required by the lender. If your down payment is under 20%, you must also pay for mortgage default insurance, with premiums of roughly 2.8% to 4% of the mortgage typically added to the loan balance. Altogether, closing costs commonly run 1.5% to 4% of the purchase price, and lenders generally want to see that you have funds for these costs beyond your down payment.
Beyond closing day, new homeowners face moving costs, immediate repairs or furnishings, and the ongoing expenses of property taxes, home insurance, utilities, and maintenance. A common rule is to budget 1% to 3% of the home's value annually for maintenance. First-time buyers who plan for the full picture — not just the down payment — transition into homeownership far more comfortably than those who stretch every dollar to close and then face unexpected costs with no reserve.
Qualifying for a mortgage in Canada depends on three main factors lenders examine closely: your credit, your income and debt levels, and your ability to pass the mortgage stress test. Preparing each in advance improves both your approval odds and the interest rate you are offered.
Your credit score is a primary determinant of the rate you qualify for. Scores above roughly 720 access the best rates, while lower scores mean higher rates or difficulty qualifying. In the year before applying, pay every bill on time, keep credit card balances well below their limits, and avoid applying for new credit, since each application can temporarily lower your score. Checking your report for errors and correcting them is also worthwhile.
Lenders assess affordability using two debt ratios: gross debt service (housing costs relative to income) and total debt service (all debt payments relative to income). Reducing other debts — car loans, credit cards, lines of credit — before applying improves these ratios and increases how much you can borrow. A larger, well-documented down payment and stable, verifiable income also strengthen your application.
Finally, every federally regulated lender applies the mortgage stress test, requiring you to qualify at the higher of your contract rate plus 2% or the minimum qualifying rate. This ensures you could still afford your payments if rates rose. The practical implication is that the maximum mortgage you qualify for under the stress test may feel tight at the higher qualifying rate, so it is wise to borrow comfortably below your maximum. Getting pre-approved before house hunting tells you exactly what you can afford and locks a rate for a period while you shop.
Q: What credit score do I need to buy a home in Ontario?
A: Most Canadian lenders require a minimum credit score of 680 for an insured mortgage (less than 20% down) and 600 to 650 for a conventional mortgage. Higher credit scores qualify you for better rates. Check your credit score through Equifax or TransUnion before applying — both offer free reports annually.
Q: Can I buy a home in Ontario with less than 20% down?
A: Yes. With as little as 5% down on homes under $500,000, you can purchase a home in Ontario. However you will need CMHC mortgage insurance which adds 2.8% to 4% of the mortgage amount to your loan balance. On a $500,000 mortgage, CMHC insurance adds up to $20,000 to your total debt.
Q: How long does it take to buy a home in Ontario?
A: From accepted offer to closing, the typical timeline is 30 to 90 days. The entire process from starting your search to moving in typically takes 3 to 6 months for most buyers. Getting pre-approved, finding a real estate agent, and researching neighbourhoods should happen before you make any offers.
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