Mortgage Options for First-Time Buyers in Canada: Step-by-Step Guide
First-time home buyers in Canada have several mortgage options designed to make home buying easier. This guide explains the main mortgage types, key incentives, and simple steps to get approved, so you can confidently navigate the Canadian real estate market.
What Mortgage Options Are Available for First-Time Buyers?
First-time buyers can choose from multiple mortgage products based on budget, income, and preferred interest structure. Below are the most common options available across Canada.
Fixed-Rate Mortgages
- Interest rate remains the same for the entire term, providing predictable monthly payments.
- Popular for buyers who prefer budgeting certainty and long-term stability.
Variable-Rate Mortgages
- Interest rate can change with market conditions, which may lower or raise your payments.
- Often starts with a lower rate than fixed mortgages but carries more interest-rate risk.
Insured Mortgages (CMHC Mortgage Insurance)
- Allows buyers to purchase with down payments as low as 5% by adding mortgage insurance.
- Required when the down payment is less than 20% of the purchase price.
Uninsured Mortgages
- Require a down payment of 20% or more, which removes the need for mortgage insurance.
- Lower monthly insurance costs, though a larger upfront saving is necessary.
Government Programs for First-Time Buyers
Canada offers programs that can reduce upfront costs and improve affordability for first-time buyers.
First-Time Home Buyer Incentive
- The federal government may contribute 5% or 10% of the home purchase price to reduce mortgage costs.
- This is a shared-equity model — repayment occurs when you sell or refinance.
Home Buyers’ Plan (HBP)
- Allows withdrawal of up to $60,000 from your RRSP tax-free for a down payment (joint purchases allowed).
- Withdrawals must be repaid to your RRSP over a 15-year period.
First Home Savings Account (FHSA)
- Contributions are tax-deductible (up to annual limits) and qualifying withdrawals are tax-free when used for a first home.
- Designed to help first-time buyers accumulate a down payment efficiently.
Step-by-Step Guide to Getting a Mortgage
- Check your credit score. A stronger score improves rate options and lender approval chances. Correct any errors before you apply.
- Set your budget. Include closing costs, property taxes, and insurance in your calculations.
- Get pre-approved. Shows sellers you are serious and defines realistic price ranges.
- Compare mortgage types and lenders. Evaluate fixed vs variable rates, penalties, and prepayment options.
- Apply for incentives. Use FHSA, HBP, or First-Time Home Buyer Incentive to reduce upfront costs.
- Lock your mortgage rate. Secure the rate to protect against market changes before closing.
- Finalize paperwork and close. Your lawyer or notary completes title transfers and disbursements at closing.
Mortgage Rate Comparison
| Mortgage Type | Typical Rate | Risk Level |
|---|---|---|
| Fixed-Rate Mortgage | Typically higher than variable | Low |
| Variable-Rate Mortgage | Often lower initially | Medium to High |
| Insured Mortgage | Can be lower due to lower down payment | Low |
Key Tips and Best Practices
- Save 20% down when possible to avoid mortgage insurance.
- Compare multiple lenders including banks, credit unions, and brokers.
- Use FHSA and HBP programs to build your down payment efficiently.
- Check prepayment privileges and penalties to reduce interest over time.
FAQ
What is the minimum down payment for first-time buyers in Canada?
Most homes under $500,000 require a minimum 5% down payment. For homes between $500,000 and $999,999, a higher percentage applies to the portion above $500,000. Properties over $1 million require 20% down.
Is a fixed or variable mortgage better?
Fixed-rate mortgages offer predictability and are generally recommended for buyers who want stable monthly payments. Variable-rate mortgages may be cheaper initially but involve rate fluctuation risk; choose based on your tolerance for variability.
Can I buy a home with zero down payment?
No. Canada does not permit zero-down purchase mortgages. Programs like FHSA and the Home Buyers’ Plan can help you save the required minimum down payment faster and with tax benefits.
Conclusion
There are many mortgage options designed to help first-time buyers succeed. With careful planning, the right incentives, and comparing lender offers, you can secure a mortgage that fits your needs and move into homeownership with confidence. Explore more expert guides on Getahouse.ca to continue your real estate journey.
Read about How to Buy Your First Home