First time home buying guide

Owning a home may be your dream, but in order for the purchase to be the happy and satisfying experience it was meant to be, you need to ensure that you are financially and mentally prepared for the responsibilities that come with it.

Some people have a notion that home ownership is like renting, but with the power to have pets and paint the walls whatever color you like. However, while these privileges are available to homeowners in most municipalities, they come with the responsibilities of a mortgage, taxes and home maintenance. Preparing for home ownership requires you to take critical stock of your finances and your expectations.

First of all, are you Financially ready?

1. Down payment (Cash)

2. Mortgage payments: principal + interest, mortgage insurance, appraisal fee

3. Closing Fees (Cash): land transfer tax & rebate, lawyer's fee, title insurance, adjustments and property registration fees 

 1. Downpayment

The minimum amount you will need for the down payment depends on the purchase price of the property you would like to buy. 

  • If the purchase price of your home is $500,000 or less, the minimum amount of down payment required is 5%.
    • the purchase price is $400,000, the down payment minimum is $20,000
  • If the purchase price of your home is between $500,000 $999,999, the minimum amount of down payment required is 5% of the first $500,000, plus 10% for the portion of the purchase price above $500,000.
    • the purchase price is $850,000, the down payment minimum is $25,000 + $35,000 = $60,000 
  • If the purchase price of your home is above $1 Million, the minimum amount of down payment required is 20% of the purchase price. 
    • the purchase price is $1,200,000, the down payment minimum is $240,000

 ** mortgage insurance is required when a down payment is less than 20%** see below

 2. Mortgage

What is your debt-to-income ratio? GDS - gross debt service ratio and TDS - total debt service ratio.

CMHC - Canada Mortgage and Housing Corporation normally restricts debt service ratio 35% (GDS) and 42% (TDS). Your debts should not be more than a percentage of your income, or it will be considered risky. Lenders look at this ratio pretty seriously. 

How to calculate them?

Note: If you are buying a condo unit, 50% of the *condo fees (maintenance fee) must be included in the GDS and TDS calculations.


JS's annual salary is $75,000, which makes his gross monthly income $6,250. His estimated mortgage payment will be $1,700/month, property taxes will be $200/month, heat will be $75/month, condo/maintenance fees will be $450/month, credit card payments of $200/month and a car loan of $300/month. 

GDS: $2,250 / $6,250 = 36%  (1% higher than the standard 35%)   

TDS: $2,750 / $6,250 = 44% (2% higher than the standard 42%)

Remember: these ratio percentages are industry guidelines and will vary from lender to lender. Therefore, they are not set in stone. 

What does this mean?

Using GDS and TDS ratio, you can find out how much of your income can be used to pay for the mortgage (principal + interest)

Let's say your income is $84,000 annually, that makes $7,000 per month.

35% (GDS) of your monthly income = $2,450 can be used for principal + interest + taxes + 50% condo fees + heat;

42% (TDS) of your monthly income = $2,940 can be used for principal + interest + taxes + 50% condo fees + heat + debt obligations.

*Mortgage Default Insurance: also known as CMHC insurance, a mandatory in Canada for down payments under 20%, costs home buyers 2.8% - 4% of their mortgage amount. It does not apply to properties purchased for more than $1 Million since a 20% down payment is required on those homes. 

The mortgage default insurance premium is calculated by how much your down payment is as a percentage of your home's purchase price. Mortgage insurance is financed through your mortgage, added to your mortgage amount and paid off over the life of your loan (usually 25 years).

 The only way to minimize your mortgage default insurance is to increase your down payment as a percentage of your home price. Two things you can do: 1) increase the down payment you put down or 2) purchase a less expensive property

*Appraisal Fees: your lender will send an appraiser to the property you are buying, they determine what a property is worth. The cost will be pass on to you, the homebuyer. An appraisal will usually cost around $300 to $500. 

Help me with getting a mortgage!

 3. Closing Fees:

  • Land Transfer Tax (LLT) & First Time Buyer LLT Rebate
    • Buyer pays LLT
    • Total LLT = Provincial LLT + Toronto Municipal LLT
      • Buying a property outside of Toronto: only pays Provincial LLT
        • Peel Region (Mississauga, Brampton, etc.), York Region (Vaughan, Markham, Richmond Hill, etc), Durham Region (Ajax, Pickering, Whiteby, etc.) and anywhere else outside of Toronto in Ontario
      • Buying a property in Toronto: one has to pay the "extra" Toronto Municipal LLT as well
      • It means that if you're buying a property outside of Toronto, you only have to pay half as much as if you were buying a property in Toronto (*you also only gets half of the total rebate - see below)

Land Transfer Tax Calculator

Calculate Land Transfer Tax (Residential)

Enter the purchase price: $ 
(no commas or decimals)

Provincial Land Transfer Tax (PLTT) Amount $ Toronto Land Transfer Tax (TLTT) Amount $ Total Land Transfer Tax (PLTT + TLTT) Amount $

(Applies to all Ontario properties including Toronto)

(Applies to Toronto properties only)

(Applies to Toronto properties only)

  • First Time Buyer Land Transfer Tax Rebate
    • Total Rebate = Provincial Rebate + Toronto Municipal Rebate = $4,000 + $4,475 = $8,475
    • Both the provincial and the municipal rebate apply when you buy a property in Toronto; only the Provincial rebate applies when you buy a property outside of Toronto. 
    • It is a rebate, not a cashback - extra rebate amount cannot be cashed nor will be passed on to your next home purchase
    • This refund is usually claimed at the time of registration, you do not have to pay the total LLT first then claim the rebate later (usually). 
      • so, if you're buying a property in Toronto for $450,000, you LLT payable on closing is $2,475 = $10,950 - $4,000 -$4,475
      • and if you're buying a property outside of Toronto for $450,000, your LLT payable on closing is $1,475 = $5,475 - $4,000
  • Lawyer
    • Lawyer's fee for closing a property usually cost around $1200 - $2500 (lawyers charge differently)
  • Title insurance: the purpose is to protect you if there's a problem with your title, such as title fraud, un-discharged liens on the property, encroachments, etc. Many lenders also require it 
    • the insurance premium depends on the value of your home
    • property worth $500,000, the insurance premium is around $200; property worth 1.5 Million, insurance premium may go up to $1,200
  • Other mandatory fees: Registration of Deed and Execution Certificate - $90, Electronic Registration $87, MLTT Admin Fee - $85
  • Adjustments: usually the seller already paid some property taxes, there will be an adjustment where the buyer has to pay back to the seller the adjusted property tax amount. Same for the maintenance fees already paid by the seller. 

Next question: Do you know the buying process?

 1. Home hunting

  • There are tons of websites out there where you can search for listings, they all have the same listings imported from the MLS (Multiple Listing Service) systems. 
  • The problem is whether you can find the right properties for you. 
    • This is why my website is created, to help people find the right properties 

2. Make an offer

  • An offer is a buyer signed Agreement of Purchase and Sale sent to a seller
    • it is a legally binding document which contains everything about this transaction
      • price, deposit, closing date, conditions to be met, etc.
  • Offers are usually conditional, all conditions have to be met for the deal to go through
    • most common conditions include: financing, home inspection, the sale of buyer's property, lawyer's review of related documents   
  • Negotiation

3. Provide deposit and meet conditions

  • a deposit has to be provided by the buyer to the listing brokerage within 24 hours after both the seller and the buyer have signed the Agreement of Purchase and Sale
    • usually 5% of the purchase price
    • a deposit is held in the listing brokerage's trust account until close
  • Once the conditions have been met, the agreement is firm, and now we will just wait until the closing date
    • If the conditions cannot be fulfilled in time, the agreement signed becomes void and null

4. Closing

  • check the closing costs above
  • meet the lawyer and sign all the documents
  • pack up, pick up the keys and move to your new home!

Are there any other programs helping first-time home buyers?

1. Home Buyers' Plan (HBP) is a program that allows you to withdraw up to $25,000 in a calendar year from your registered retirement savings plans (RRSPs) to buy or build a qualifying home for yourself or for a related person with a disability

2. First-time Home Buyers' Tax Credit (HBTC)