How Much House Can You Afford?
Before you start browsing listings, you need a realistic budget. The general rule is that your total housing costs (mortgage principal and interest, property taxes, and heating) should not exceed 32% of your gross monthly income — this is the Gross Debt Service (GDS) ratio lenders use.
Your total debt payments (housing + car loan + credit cards + other loans) should stay below 44% of gross income— the Total Debt Service (TDS) ratio.
In Ontario's major markets, many buyers find the stress test (see section 5) is the binding constraint rather than these ratios. The best way to get an accurate number is to use an affordability calculator or speak with a broker who can run the numbers against your full financial picture.
Affordability Calculator
Enter your income, debts, and down payment to find your maximum purchase price.
Saving Your Down Payment
The minimum down payment in Canada depends on the purchase price:
| Purchase Price | Minimum Down Payment |
|---|---|
| Up to $500,000 | 5% |
| $500,001 – $999,999 | 5% on first $500K + 10% on remainder |
| $1,000,000+ | 20% (no CMHC insurance available) |
Putting down at least 20% eliminates the CMHC mortgage default insurance premium and reduces your total borrowing cost. However, many first-time buyers use the 5% minimum and offset the insurance cost through the FHSA and RRSP HBP programs below.
FHSA and RRSP Home Buyers' Plan
Canada offers two powerful registered accounts to help first-time buyers save faster:
First Home Savings Account (FHSA) — new since 2023
The FHSA is the most advantageous savings vehicle available to first-time buyers. It combines the best features of an RRSP and a TFSA:
- Contribute up to $8,000 per year
- Lifetime contribution limit: $40,000
- Contributions are tax-deductible (reduces your taxable income)
- Qualifying withdrawals for a first home are completely tax-free
- Unused room carries forward to the next year
- Can be combined with the RRSP HBP on the same purchase
Tip: If you haven't opened an FHSA yet, open one now even if you can only contribute $1. The account needs to be open for at least one calendar year before you can make a qualifying withdrawal — so the clock is already ticking.
RRSP Home Buyers' Plan (HBP)
The RRSP HBP allows first-time buyers to withdraw up to $35,000 tax-free from their RRSP for a qualifying home purchase. If you're buying with a partner, each of you can withdraw $35,000 — a combined $70,000.
- The funds must have been in the RRSP for at least 90 days
- You must repay the full amount over 15 years, starting 2 years after withdrawal
- Annual repayment is 1/15th of the total withdrawn — if you skip a year, that amount is added to your income
Getting Pre-Approved
A mortgage pre-approval is a lender's conditional commitment to lend you a specific amount at a specific rate. It gives you a firm budget before you start making offers and holds your rate for 90–120 days.
If rates drop between your pre-approval and closing, you typically receive the lower rate. If rates rise, your pre-approval rate is protected.
Documents you'll need
Self-employed applicants typically need 2 years of T1 generals and business financial statements. A broker can advise on exactly what your specific situation requires.
CMHC Mortgage Default Insurance
If your down payment is less than 20%, your mortgage must be insured through the Canada Mortgage and Housing Corporation (CMHC), Sagen, or Canada Guaranty. This protects the lender if you default — not you — but it also allows lenders to offer lower interest rates on insured mortgages.
CMHC Premium Rates
| Down Payment | LTV Ratio | CMHC Premium |
|---|---|---|
| 5–9.99% | 90.01–95% | 4.00% |
| 10–14.99% | 85.01–90% | 3.10% |
| 15–19.99% | 80.01–85% | 2.80% |
| 20%+ | Up to 80% | Not required |
The premium is added to your mortgage balance — you don't pay it upfront. On a $600,000 home with 5% down ($30,000), the loan would be $570,000, and the 4.00% premium adds $22,800 to your mortgage — totalling $592,800. Ontario also charges PST on the premium amount at closing.
Payment Calculator
Calculate your monthly payment with CMHC insurance included.
The Mortgage Stress Test
The stress test was introduced by OSFI (Canada's banking regulator) to ensure borrowers can handle rising rates. You must qualify at the higher of:
- Your contract rate + 2%
- The minimum qualifying rate of 5.25%
For example: if you're offered a 5-year fixed rate of 4.79%, your qualifying rate is 6.79% (4.79% + 2%). This typically reduces the maximum mortgage you qualify for by roughly 20% compared to qualifying at the contract rate.
The stress test applies to all mortgages at federally regulated lenders (banks, credit unions under federal charter). Some credit unions and private lenders are not federally regulated and may have different rules.
Stress Test Calculator
Find out exactly how much you qualify for under the stress test rules.
Closing Costs in Ontario
First-time buyers are often surprised by closing costs. Budget 1.5–4% of the purchase price in addition to your down payment. On a $750,000 home, that's $11,250–$30,000.
Closing Costs Calculator
Estimate your total closing costs including LTT and legal fees.
Why Use a Mortgage Broker?
A mortgage broker works for you, not the bank. Where a bank can only offer its own products, a broker shops your application across 30+ lenders simultaneously — including banks, credit unions, and monoline lenders that don't have retail branches.
Access to 30+ lenders
Including lenders that only work through brokers and offer lower rates.
No cost to you
Brokers are paid by the lender on funded mortgages. You pay nothing.
One credit check
Shopping multiple lenders yourself triggers multiple hard inquiries. A broker submits one.
Expert guidance
Licensed mortgage professionals advise on rate type, term, prepayment options, and portability.
All RATECORE mortgage professionals hold FSRA licences and have experience specifically with first-time buyers. Your consultation is free, and there's no obligation or impact to your credit score.