If you're buying your first home in the Greater Toronto Area, you need to know about government programs that can help you save tens of thousands of dollars, minimum down payment rules that have changed for 2026, and the mortgage stress test that affects your buying power. This guide walks you through pre-approval to closing—and shows you what first-time buyers are getting wrong.
Government Programs for First-Time Buyers
The federal and provincial governments have stacked four major programs to help first-time buyers stretch their savings and maximize their purchasing power in the GTA.
First Home Savings Account (FHSA)
Launched in 2023, the FHSA is the most flexible program for first-time buyers. You can contribute $8,000 per year, with a lifetime limit of $40,000. Unlike an RRSP, unused contribution room carries forward to the next year, and you can catch up—just not more than $16,000 in a single year (current year $8,000 plus one prior year's $8,000).
Your contributions are tax-deductible (like an RRSP), but when you withdraw the money to buy your home, it comes out tax-free (like a TFSA). The account must be closed by the end of the 15th year after it opens, or by December 31 of the year you turn 71, whichever comes first. If you don't use the funds by then, you can transfer them to an RRSP or RRIF with no RRSP room required.
A couple can each open an FHSA—that's up to $80,000 combined in tax-advantaged savings.
RRSP Home Buyers' Plan (HBP)
The HBP lets you withdraw up to $60,000 from your RRSP to buy a home. In 2024, the federal government increased the limit from $35,000—a significant boost for savers. The funds must be repaid over 15 years, beginning the second year after you withdraw. Canadians who withdrew between January 1, 2022, and December 31, 2025, got an extra three-year grace period, so repayment doesn't start until year five.
You and your spouse can each use the HBP independently—that's up to $120,000 combined if you're both first-time buyers.
And here's the key: You can use both the FHSA and the HBP for the same purchase. A couple maximizing both programs could put down $200,000+ from registered accounts alone.
Federal First-Time Home Buyers' GST/HST Rebate
If you're buying a new home (pre-construction or newly built) with an agreement signed on or after March 20, 2025, you may qualify for a federal GST/HST rebate. First-time buyers on new homes valued up to $1,000,000 can claim up to $50,000 back—100% of the federal portion of HST paid.
This rebate phases out for homes valued $1,000,001 to $1,500,000 and disappears entirely for homes above $1.5 million.
Ontario & Toronto Land Transfer Tax Rebates
Both Ontario and the City of Toronto offer first-time buyer rebates on land transfer tax (LTT).
Ontario: Maximum rebate of $4,000, which covers the full Ontario LTT on homes up to approximately $368,000. You must be at least 18, a Canadian citizen or permanent resident, never owned a home anywhere in the world, and plan to occupy the home as your principal residence within nine months of closing.
Toronto (if you're buying in Toronto city limits): Maximum rebate of $4,475 on the Toronto MLTT, with the same eligibility rules. You can claim both rebates on the same purchase.
Example: A first-time buyer purchasing an $800,000 home in Toronto would receive combined rebates of $8,475—significant tax savings that lower your closing costs.
How Much You Need
Minimum Down Payment Rules
As of 2026, minimum down payment rules depend on the purchase price:
Up to $500,000: Minimum 5% down
$500,001 to $1,499,999: 5% on the first $500,000 + 10% on the amount above
$1,500,000+: 20% minimum (no mortgage insurance available)
For an $800,000 purchase, the minimum is 5% on the first $500,000 ($25,000) plus 10% on the remaining $300,000 ($30,000)—total $55,000, or 6.875% of the purchase price.
The $1.5 Million Insured Mortgage Cap
In December 2024, the federal government raised the cap on insured mortgages from $1,000,000 to $1,500,000. This expanded access to insured mortgages (and therefore lower down payment options) for buyers purchasing homes up to $1.5 million, subject to the tiered down payment rules above.
If your home is priced above $1.5 million, you must put down a full 20% and cannot use mortgage default insurance.
30-Year Amortization for First-Time Buyers
Another December 2024 change allows first-time home buyers to extend their mortgage amortization to 30 years. (This also applies to any buyer purchasing a newly built home, regardless of first-time status.)
Stretching your amortization lowers your monthly payment and improves your debt-service ratio—but you'll pay more interest over the life of the loan. Talk to a mortgage broker about whether a 30-year amortization is right for you.
Mortgage Default Insurance (CMHC)
If you're putting down less than 20%, you'll pay mortgage default insurance. This protects the lender, not you, but it's mandatory.
Insurance premiums range from 0.60% to 4.50% of your mortgage, depending on how much you're putting down. Most first-time buyers with 5–10% down pay the 4.00% premium tier. The premium is added to your mortgage balance.
Important: Ontario charges Provincial Sales Tax (PST) on the insurance premium itself (currently 8%—confirm the current rate with your mortgage broker). This PST cannot be rolled into the mortgage—it's a cash payment due at closing. On an $800,000 purchase with 5% down and mortgage insurance, that cash closing cost alone could be around $2,400.
The Mortgage Stress Test
The mortgage stress test is a qualification rule that affects every first-time buyer—and it's a major reason some buyers don't get approved for as much as they expect.
Federal regulation requires that you qualify at the greater of two rates:
The actual mortgage rate your lender is offering + 2%, or
A floor rate of 5.25%
For example, if a lender is quoting you 4.25% on a five-year fixed, you must qualify at max(4.25% + 2%, 5.25%) = 6.25%. The lender calculates what you'd owe at 6.25% and verifies you can afford it—even though you'll actually pay 4.25%.
This shrinks your buying power by 10–20% compared to what you might expect based on current rates. Work with a mortgage broker to model different scenarios and understand your real approval amount before you start house hunting.
Step by Step: Pre-Approval to Closing
1. Get Pre-Approved (Weeks 1–2)
Contact a mortgage broker or your bank and apply for a mortgage pre-approval. You'll provide pay stubs, tax returns, bank statements, and employment history. The lender verifies your credit, income, and debt, then issues a pre-approval letter stating how much you can borrow.
A pre-approval is not a formal commitment, but it's essential—it shows sellers you're a serious buyer and lets you make an offer confidently.
2. Get a Home Inspection (Week 3)
This is critical. A home inspection uncovers structural issues, electrical or plumbing problems, roof condition, and other defects. Budget $450–$700+ depending on the home's size and age. Never waive the home inspection condition—it's your protection against buying a money pit.
3. Get a Lawyer (Week 3–4)
You must hire a real estate lawyer. Your lawyer reviews the agreement, conducts title searches, orders a title insurance policy, and handles all legal registration at closing. Budget $1,500–$3,000+ in legal fees plus disbursements.
4. Get a Formal Mortgage Commitment (Week 4)
Once your offer is accepted and conditions are satisfied, the lender issues a formal mortgage commitment. This is your green light to close. Read it carefully—confirm the rate, amount, amortization, and any conditions (like property appraisal or final credit check).
5. Order a Final Appraisal (If Required)
Many lenders require an appraisal to confirm the home's value matches the purchase price. This typically costs $300–$600 and takes 1–2 weeks.
6. Closing (Day 60–120+)
Your lawyer coordinates the final walk-through inspection, collects all funds for down payment and closing costs, and registers the mortgage and property deed. You receive the keys and take possession.
Common First-Time Buyer Mistakes
1. Not Budgeting for Closing Costs
Buyers often forget that down payment is just part of the cash needed. Closing costs—legal fees, home inspection, land transfer tax, CMHC insurance PST, title insurance—add 1.5–4% to your purchase price. For an $800,000 home, that's $12,000–$32,000 on top of your down payment.
In Toronto, land transfer tax alone on an $800,000 first-time buyer purchase is roughly $16,475 combined (Ontario + Toronto rebates applied). Plan ahead.
2. Changing Jobs Before Closing
Mortgage lenders verify employment right up to closing day. Changing jobs, taking unpaid leave, or switching from employee to self-employed can jeopardize your approval. If a job change is necessary, tell your lender immediately.
3. Co-Signing for Someone Else
Taking on a friend's or family member's debt (car loan, line of credit) increases your debt-service ratio and reduces the mortgage you can carry. Avoid new debts and co-signing before closing.
4. Carrying a High Credit Card Balance
Even if you don't apply for new credit, a high balance on an existing card hurts your debt-service ratio. Pay down balances before applying for your mortgage.
5. Offering on a Home Without a Pre-Approval
Offers without pre-approval are rarely taken seriously. Get your pre-approval in writing before you make an offer—it signals to the seller that you're ready to close.
6. Waiving the Home Inspection
Some buyers waive the inspection to make a competitive offer. This is a risky strategy. A $500 inspection could save you thousands by flagging foundation cracks, roof leaks, or electrical hazards. Don't waive it.
7. Not Shopping for a Mortgage
Your bank's rate may not be the best. Shop with 2–3 lenders and a mortgage broker. A rate difference of 0.25% saves thousands over 5–25 years.
Frequently Asked Questions
What's the difference between a pre-approval and a formal mortgage commitment?
A pre-approval is a preliminary assessment based on the financial information you provide. It's not a guarantee and can be rescinded if your credit or employment changes. A formal mortgage commitment is issued after your offer is accepted and conditions are satisfied—it's your lender's binding promise to fund the mortgage, subject to normal conditions like a final appraisal and satisfactory home inspection.
Can I use my RRSP and FHSA on the same purchase?
Yes. You can withdraw up to $60,000 from your RRSP under the Home Buyers' Plan and contribute up to $40,000 to an FHSA (lifetime), then withdraw that FHSA money for the same home purchase. A couple could combine both programs for substantial down payment savings.
What happens if the home appraises for less than the purchase price?
If the appraisal comes in below the purchase price, the lender may reduce the mortgage amount or ask you to increase your down payment. You can renegotiate the purchase price with the seller or walk away if you have a financing condition in your agreement.
Do I need to occupy the home as my principal residence to claim the first-time buyer rebates?
Yes. Both the Ontario and Toronto first-time buyer rebates require you to occupy the home as your principal residence within nine months of closing. If you rent it out or buy it as an investment, you won't qualify.
What's the mortgage stress test, and how does it affect my buying power?
The stress test requires you to qualify at a higher rate than you'll actually pay. If you're offered 4.25%, you must qualify at 6.25%. This reduces the amount you can borrow by roughly 10–20% compared to qualifying at the actual offered rate. Always confirm your approved mortgage amount with your lender before house hunting.
How long does the mortgage approval process take?
From pre-approval to formal commitment typically takes 4–6 weeks after your offer is accepted. From acceptance to closing can be 60–120+ days depending on the market, inspection results, and appraisal timing. A typical timeline is 60–90 days.
Can I buy outside the GTA and apply the first-time buyer rebates?
The Ontario rebate applies to any Ontario purchase. The Toronto rebate applies only to properties within the City of Toronto boundaries. If you buy in another Ontario municipality (Durham, York, Peel region), you'll claim the Ontario rebate but not the Toronto municipal rebate.
The figures, rates, and rules in this article are for informational purposes and reflect rules current as of June 2026. Real estate transactions involve complex legal, tax, and financial considerations specific to your situation. Always confirm details with a licensed mortgage broker, Ontario real estate lawyer, and/or chartered professional accountant (CPA) before making any decisions.
Who Is Inna Gold?
With over a decade of experience in the GTA real estate market, Inna Gold is a REALTOR® with RE/MAX Experts who specializes in helping first-time buyers navigate the purchase process. Inna's approach combines market knowledge with genuine care for her clients' long-term interests. She stays current with mortgage rules, tax programs, and market trends so her clients don't have to.
"I pride myself for being knowledgeable and invested in real estate; keeping up with market trends and having my clients' best interests at heart. I master negotiation and never push my clients beyond their comfort levels. Real estate is a true passion of mine. I want to help everyone find their dream home and have the best experience throughout the journey." — Inna Gold, REALTOR®, RE/MAX Experts
Inna Gold, REALTOR® RE/MAX Experts — 277 Cityview Blvd Unit 16, Vaughan, ON L4H 5A4 Cell: 416-500-0696 | Office: 905-499-8800 info@innagold.com | innagold.com
Comments:
Post Your Comment: