Key Takeaway

Getting your first mortgage in Canada requires a minimum 5 per cent down payment on homes up to C$500,000, plus you must pass the OSFI mortgage stress test at a qualifying rate higher than your actual rate. If your down payment is under 20 per cent, you will need CMHC mortgage default insurance. First-time buyers can use the First Home Savings Account (FHSA) and the RRSP Home Buyers’ Plan to save tax-free for their down payment and closing costs.

Down Payment and Insurance Requirements

The minimum down payment in Canada is 5 per cent for the first C$500,000 of the purchase price and 10 per cent for any amount above that, up to C$1 million (homes over C$1 million require 20 per cent down). When your down payment is less than 20 per cent of the home price, your lender will require mortgage default insurance from CMHC, Sagen, or Canada Guaranty. The insurance premium ranges from 0.6 per cent to 4 per cent of the mortgage amount, depending on your down payment size, and is usually added to your mortgage balance rather than paid upfront.

According to the Canada Mortgage and Housing Corporation, mortgage default insurance protects the lender if you stop making payments, and it allows you to purchase a home sooner with a smaller down payment (CMHC, 2026).

The Mortgage Stress Test

Every mortgage applicant in Canada must qualify under the OSFI mortgage stress test, which requires you to prove you can afford payments at either your contract rate plus 2 percentage points or 5.25 per cent, whichever is higher. This qualifying rate is higher than the rate you will actually pay, designed to ensure you can still afford your mortgage if rates rise when you renew. The stress test applies to insured mortgages, uninsured mortgages, and refinances, and it directly affects how much you can borrow.

For example, if you are approved for a 5-year fixed rate at 4.5 per cent, you must qualify at 6.5 per cent (4.5 per cent plus 2 percentage points). A couple earning C$100,000 combined might qualify for a C$450,000 mortgage at the actual rate, but only C$380,000 after the stress test is applied, depending on their other debts and expenses. Your maximum borrowing amount shrinks under the test, so factor this into your home search budget.

Government Savings Programs for First-Time Buyers

The First Home Savings Account (FHSA), launched in 2023, lets you contribute up to C$8,000 per year (C$40,000 lifetime) and deduct contributions from your income like an RRSP, while withdrawals for a qualifying first home purchase are tax-free. You can open an FHSA if you are 18 or older, a Canadian resident, and have not owned a home in the current year or the previous four calendar years.

Read also: How to Lock in Your Mortgage Rate for an August Closing in Canada

The RRSP Home Buyers’ Plan allows you to withdraw up to C$60,000 from your RRSP (C$120,000 for a couple) to buy or build your first home, and you have 15 years to repay the amount without paying tax on the withdrawal (CRA, 2026). You can use both programs together to maximize your down payment savings.

Getting Pre-Approved and Next Steps

Start by getting pre-approved with a lender or licensed mortgage broker. Pre-approval gives you a rate hold (typically 90 to 120 days), shows sellers you are a serious buyer, and clarifies your borrowing limit after the stress test is applied. Bring recent pay stubs, tax returns, bank statements, and identification. Shop around: mortgage rates and terms vary by lender, and a broker can compare offers from multiple institutions at no cost to you.

Once pre-approved, budget for closing costs (legal fees, land transfer tax, home inspection, title insurance), which typically add 1.5 to 4 per cent of the purchase price on top of your down payment. Confirm your timeline with your lender and lawyer to ensure funds are available on your closing date.

Disclaimer

This article provides general educational information only and is not personalized financial, lending, legal, or tax advice. Mortgage products, eligibility, rates, insurance requirements, and government programs vary by province, lender, and your individual circumstances. The OSFI stress test, CMHC insurance premiums, and FHSA or Home Buyers’ Plan rules are current as of July 2026; confirm the latest requirements and available rates with a licensed mortgage broker or financial institution before making decisions. Always consult the Financial Consumer Agency of Canada or a qualified professional for advice specific to your situation.