Mortgages for the First Time Home Buyers


Thinking about buying your first property?

Buying a home is one of the biggest decisions you will make in life. It’s a significant financial investment and understanding each step of the mortgage process and getting the facts you need to make the right mortgage decision is key to ensuring this investment is worth your time, money and effort spent.

Each one has different mortgage needs and there are many mortgage products to choose from.

I will help you figure out all the  things you need to know about getting a loan to buy your first home.

Should You Choose a Fixed or Variable Rate Mortgage

One of the critical choices when you’re applying for a new mortgage is choosing between a

fixed or variable interest rate loan. Understanding the differences between each type of mortgage can help save you money and meet your financial goals.

With fixed rate loans, interest rates stay the same throughout the life of the loan. This means rates won’t change with fluctuations in the market and monthly payments remain constant until the end of the loan’s term.

Variable-rate mortgages have interest rates that adjust to changes in the market. When the bank’s prime rate falls, interest rates will decline. When prime rates increase, so will interest rates on mortgages.Because of this risk, interest rates on fixed-rate mortgages tend to be higher than on variable-rate mortgages.

Many homeowners choose the fixed rate option because it protects them against the possibility of rising interest rates and is especially helpful in allowing them to plan and budget for their payments. One of the most popular kinds of fixed rate loans is a five-year fixed rate mortgage, which locks your interest rate for the first five years of your loan.

Mortgage Down Payment

The amount of your down payment influences the type of property you can afford, the type of mortgage you get and whether you need to get mortgage default insurance.

In Canada, the minimum down payment requirements for all property purchases are:

For homes that cost up to $500,000, the minimum down payment is 5%

For homes that cost more than $500,000 and less than $1 million, the minimum down payment is 5% of the first $500,000 plus 10% of the remaining balance

For homes that cost $1 million or more, the minimum down payment is 20%

Here’s a sample computation:

Home price$480,000$880,000$1,300,000
First $500,000 x 5%$24,000$25,000N/A
More than $500,000 and less than

$1,000,000 x 10%

More than $1,000,000 x 20%N/AN/A$260,000
Down payment amount$24,000$63,000$260,000
  • If your down payment is 20% or more, you’ll get a regular mortgage (which is more popularly known as a conventional mortgage).
  • If your down payment is less than 20% of the purchase price of the home you’ll get a high-ratio mortgage, which requires you to purchase mortgage default insurance.

CMHC Insurance (mortgage default insurance)

In Canada, homebuyers with a down payment of less than 20% have to purchase mortgage default insurance, also known as CMHC insurance, which serves as protection for your lender in the event you default on your payments.

The amount of CMHC insurance you pay depends on:

  1. the amount you’re borrowing, and
  2. the percentage of your down payment.

You pay lower premiums as your down payment increases.

  • For down payments of 5% to 9.99%, homebuyers pay a premium rate of 4.0%.
  • For down payment amounts of 10% to 14.99%, the CMHC insurance is 3.10% of the mortgage amount.
  • For down payments of 15% to 19.99%, the CMHC insurance is 2.80%.

You can purchase CMHC Insurance and pay for it upfront or just add it to your mortgage total.

First Time Home Buyer Incentives in Canada

Getting a first-time home buyer loan can be difficult, especially in expensive cities like Toronto and Vancouver. It’s a good thing that there are many programs available for first-time home buyers in Canada that can help make housing more affordable and accessible for those looking to buy their first home.

There are three main programs for first-time home buyers available to Canadians nationwide:

  • Land Transfer Tax Rebate Programs, which varies by province and municipality
  • The Government of Canada’s First-Time Home Buyer Incentive Program
  • The RRSP Home Buyers’ Plan

We understand that you can’t wait to start house shopping, but it’s important you take your time finding a lender and be comfortable with the type of mortgage you choose. I am here to help you beat the banks and find the best mortgage lenders for first time homebuyers that match your needs and circumstances. Give us a call today!