Buying your first home in Canada involves more than finding the right property. Understanding how mortgages work, what tax incentives are available, how RRSP funds can be used, and what closing costs to expect can make a significant difference in both affordability and long-term financial comfort.
Below are key considerations every first-time home buyer should understand before purchasing.
1. Understanding Your Mortgage Options
For most first-time buyers, a mortgage is the largest financial commitment they will make. Before house hunting, it’s important to understand:
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Mortgage pre-approval: Confirms how much you can borrow and helps lock in an interest rate for a limited time.
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Fixed vs. variable rates: Fixed-rate mortgages offer payment stability, while variable rates fluctuate with market conditions.
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Down payment requirements:
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Minimum 5% for homes under $500,000
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Higher minimums apply as purchase price increases
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Mortgage insurance (CMHC): Required when the down payment is less than 20%.
A mortgage should be structured around long-term affordability, not just maximum borrowing capacity.
2. First-Time Home Buyer Tax Incentives
Canada offers several incentives designed to help first-time buyers reduce upfront costs:
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First-Time Home Buyers’ Tax Credit (HBTC)
Provides a non-refundable federal tax credit, helping offset legal and closing expenses. -
Land Transfer Tax Rebates
Many provinces and municipalities offer rebates for first-time buyers.
In Ontario, eligible buyers may receive:-
A provincial land transfer tax rebate
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A municipal rebate in Toronto (if applicable)
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These incentives can significantly reduce the cash required at closing.
3. Using RRSP Funds Through the Home Buyers’ Plan (HBP)
First-time buyers may withdraw up to $35,000 per person from their RRSP under the Home Buyers’ Plan:
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Funds must be repaid over 15 years
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Repayment typically begins the second year after purchase
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Withdrawals are not taxed if repaid on schedule
The HBP can be an effective way to increase your down payment, but it’s important to consider the long-term impact on retirement savings.
4. Planning for Closing Costs
Many first-time buyers underestimate closing costs, which typically range from 1.5% to 4% of the purchase price. These may include:
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Legal fees and disbursements
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Land transfer tax (after applicable rebates)
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Title insurance
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Home inspection and appraisal fees
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Property tax and utility adjustments
Budgeting for these costs early helps prevent last-minute financial strain.
5. Think Beyond the Purchase Price
In addition to the mortgage payment, buyers should plan for ongoing ownership costs such as:
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Property taxes
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Home insurance
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Utilities and maintenance
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Condo fees (if applicable)
A sustainable budget should allow room for savings, emergencies, and lifestyle needs.
Final Thoughts
Buying your first home is both a financial and lifestyle decision. Understanding how mortgages work, taking advantage of available tax incentives, using RRSP funds strategically, and preparing for closing costs can help first-time buyers enter the market with confidence.
Proper planning not only reduces stress at closing but also supports long-term financial stability as a homeowner.
Contact The Fisher Group – Your Real Estate Experts in Oakville and the GTA
Fisher Yu
📱 647.598.8488
📧 [email protected]
🌐 thefishergroup.ca
