For first-time home buyers in Canada, the mortgage process comes with a few extra perks to help you get into the market. Here’s what you need to know:

The Basics

The process is —pre-approval, house hunting, offer, mortgage approval, and closing—but as a first-timer, you’re eligible for some government incentives that can ease the financial load.

Down Payment

You’ll need at least 5% of the purchase price for homes up to $500,000. For example, on a $500,000 home, that’s $25,000. If the home costs more, it’s 5% on the first $500,000 and 10% on the rest up to $1 million (e.g., a $700,000 home requires $35,000—5% of $500K plus 10% of $200K). If your down payment is under 20%, you’ll need mortgage insurance through CMHC or a private insurer, which adds a premium (2.8% to 4% of the loan, depending on your down payment size) to your mortgage. Anything over $1 million needs 20% down.

First-Time Home Buyer Incentives

1. Home Buyers’ Plan (HBP): You can withdraw up to $35,000 tax-free from your RRSP (Registered Retirement Savings Plan) to use towards your down payment. If you’re buying with a partner who’s also a first-timer, that’s $70,000 combined. You’ll repay it over 15 years, starting the second year after withdrawal.

2. First Home Savings Account (FHSA): You can contribute money tax-free, watch it grow tax-free, and withdraw it tax-free—if you use it to buy your first home. It’s exclusive for people who haven’t owned a home in the last four years (or ever).
   

3. Tax Credits: You can claim a $10,000 non-refundable tax credit (the Home Buyers’ Amount) when you file your taxes, which gives you up to $1,500 back if you’re in the highest tax bracket. There’s also a GST/HST rebate for new homes or major renovations, depending on the purchase price of the home.

Mortgage Stress Test

Even as a first-time home buyer, you’ll face the stress test. Lenders check if you can afford payments at a higher rate—either 5.25% or your contract rate plus 2%, whichever is more—to ensure you’re not stretched thin if rates rise.

Other Costs to Take into Account:

• Closing Costs: Budget 1.5% of the home price for legal fees, title insurance, land transfer taxes, and inspections.
  

• Land Transfer Tax Rebates: In BC, first-timer home buyers can get a rebate to offset this tax—up to $8,000 in BC for homes with a fair market value of $835,000 or less.