First-time home buyer mortgages and incentives

Buying your first property is among the biggest decisions you’ll make in a lifetime. And if you get your home at a good price with strong mortgage rates and terms, it can also become an investment that grows your money over time. Find out more about how you can take advantage of first-time home buyer incentives to get the best deal on your first mortgage.

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Name	Product	Interest Rate (APR)	Loan Term	Min. credit score	Provincial availability
Tangerine Mortgages Tangerine Mortgages		2.14%	5 Year Fixed Rate	620	All of Canada	Go to site More Info	Get competitive rates and make annual lump sum prepayments up to 25% of your original mortgage amount with a Tangerine mortgage.	Compare	loading Fetching your data...
Meridian Mortgages Meridian Mortgages		2.24%	5 Year Fixed Closed Rate	600	ON	Go to site More Info	Meridian is a credit union that provides Ontario residents featured rates and the option to defer one payment every 12 months without penalty.	Compare	loading Fetching your data...
Homewise Mortgages Homewise Mortgages		Varies	Varies	600	Not available in Quebec	Go to site More Info	Homewise's personal advisors can get you mortgage rates from over 30 banks and lenders.	Compare	loading Fetching your data...
Loans Canada Mortgages Loans Canada Mortgages		1.79%	5 Year Fixed Rate	400	All of Canada	Go to site More Info	Loans Canada connects borrowers with a mortgage broker in their area. Bad credit, EI and CERB applicants are considered.	Compare	loading Fetching your data...
intelliMortgage Mortgages intelliMortgage Mortgages		1.42%	5 Year Fixed Rate	680	AB, BC, NL, ON, PE	Go to site More Info	intelliMortgage is an online mortgage broker that works with over 100+ banks and mortgage lenders across Canada.	Compare	loading Fetching your data...
Breezeful Mortgages Breezeful Mortgages		1.74%	5 Year Fixed Rate	600	All of Canada	Go to site More Info	Breezeful is a 100% online mortgage broker that connects borrowers to competitive rate offers from over 30+ banks and mortgage lenders.	Compare	loading Fetching your data...

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Choosing the right type of first-time home buyer mortgage

There are a couple of different types of first-time home buyer mortgages you can sign up for depending on your preferences. You can mix and match the following options to get the ideal fit:

1. Fixed vs. variable rate. Fixed-rate mortgages come with monthly payments that remain the same for your whole loan term, which lets you stick to a budget. Variable rates mortgages fluctuate up or down, depending on what the market is doing. This means they tend to be more risky because they come with unpredictable monthly payments.
2. Closed vs. open mortgage. Closed mortgages typically come with lower interest rates but they don’t allow you to refinance or repay your loan before your term is up unless you pay a penalty. Open mortgages give you more flexibility to make early payments or refinance your loan, but they typically come with higher interest rates.
3. Short-term vs. long-term mortgage. You can usually finance your mortgage for a term that lasts between six months and five years. You’ll typically get the lowest rates with a five-year term, though this can vary by lender. That’s why you’ll want to check the rates for a number of different terms and lenders to find the best deal.

How to compare lenders as a first-time home buyer

Consider the following factors when you’re comparing lenders to find the best fit for your needs:

• Interest rates. Compare the interest rates on offer to find the best rates for your mortgage. Finding rates that are even 0.5% lower than the next competitor can save you thousands of dollars in interest over the course of your term.
• Fees. Consider set-up and prepayment fees when looking for your first-time home buyer mortgage. These fees can sometimes add up to between 2% and 10% of your home loan, so it’s worth finding the lender that will charge you less.
• Term length. Look for a term length that doesn’t lock you in for too long but allows you to take advantage of the lowest interest rates. Five-year mortgage terms are the most popular and often the cheapest terms in Canada.
• Amortization period. The amortization period you choose will influence the overall length of time you have to repay your loan. This can affect the size of your loan payments and the number of terms you need to renew for. The most popular amortization period in Canada is 25 years.
• Down payment requirements. Aim to find a lender that offers a down payment option you can afford. Your best bet is to put a down payment of 20% on your loan since this will save you money on mortgages insurance in the long run. Be prepared to pay extra for insurance if you decide to go for a 5% to 15% down payment.
• Customer service. Search for a lender that has a solid reputation for offering high-quality customer service, even if this means accepting slightly higher rates. This will save you headaches when renegotiating your loan or switching to a new lender.

Ways to save money on your first-time home buyers’ mortgage

There are a few ways you can save money on your first-time home buyers’ mortgage. These include the following:

• Compare lenders. Compare as many lenders as you can to find the best rates and terms. It can be useful to use an online mortgage broker to help you make a quick comparison. You can also compare lenders on your own if you don’t mind putting in the extra leg work.
• Apply for first-time home buyers’ incentives. Look for special offers such as the RRSP Home Buyers’ Plan, the First-Time Home Buyer Incentive and the First-Time Home Buyers’ Tax Credit. These can save you money on buying your first home and on paying for incidentals such as taxes in the first year of home ownership.
• Put down a larger down payment. Aim to make a down payment of at least 20% of your mortgage. This requires more savings but you will allow you to skip purchasing mortgage insurance (which can save you thousands over a five-year term). Find out more about how to save for a house
• Ask your parents to cosign your mortgage. If your parents own their own property, they may be able to guarantee your home loan so you don’t need to worry about putting down a 20% deposit. Just make sure they understand that they risk losing their own home if you can’t make your mortgage payments.

First-time home buyer mortgage incentives

You can learn more about government incentives, such as the RRSP Home Buyers’ Plan and the First-Time Home Buyer Incentive, below:

RRSP Home Buyers’ Plan

The RRSP Home Buyers’ Plan lets you take money out of your RRSP as a first-time home buyer to buy or build a home for yourself or a family member with a disability. In 2019, the government set the RRSP first-time home buyer withdrawal limit at $35,000. As a couple buying your first home, you can borrow as much as $70,000 under the RRSP Home Buyers’ Plan.

Just be aware that the RRSP Home Buyers’ Plan requires you to repay any money you borrowed from your RRSP in 15 years or less. If you fail to repay your RRSP money in this time period, you’ll be taxed heavily on it.

The First-Time Home Buyer Incentive

If you’re a first-time buyer with a qualified annual income of $120,000 or less, you may be eligible for the First-Time Home Buyer Incentive, which is a shared-equity mortgage with the government of Canada. This incentive lets you share the risks and rewards of taking on a new mortgage

You can apply for up to 5% of the purchase price of your home with the First-Time Home Buyer Incentive in most cases. Within 25 years or when you sell, you repay 5% of the sale price to the government if you have equity in the home. If your sale price is lower than what you bought the house for, the government will reimburse you for 5% of the negative equity.

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How much can I borrow?

Enter information such as your household income, number of dependants and any existing debts you owe into our calculator. This calculator estimates your expenses using a standard cost-of-living index to give you a home cost that you should be able to afford:

Bottom line

There are a number of actions you can take to make the most out of being a first-time home buyer. Learn how to compare mortgages and find out what special offers and incentives you might be eligible for. In particular, learn more about the RRSP Home Buyers’ Plan and the First-Time Home Buyer Incentive as well as any tax credits you could be eligible for.

Frequently asked questions

• Which type of mortgage should I choose?

  Most Canadians choose to take out a fixed rate mortgage with a 25 year amortization period, but the option that makes sense for you will depend on your personal situation. You can choose to take out a closed mortgage if you don’t plan to make any additional payments on your outstanding balance or an open mortgage if you want to prepay without penalty.

• How does the First-Time Home Buyer Incentive work?

  The First-Time Home Buyer Incentive lets you share the equity in your home with the Canadian government in exchange for help with your down payment. You can usually apply for up to 5% of your down payment. You then have to give 5% of the positive equity in your home when you sell (or you can split the negative equity with them if you don’t make any money on your house).

• How can I withdraw my RRSP for the Home Buyers' Plan?

  You can use the Home Buyers’ Plan form (T1036) to request to withdraw funds from an RRSP. Once you send the Home Buyers’ Plan form in, your request will usually be approved and then you can withdraw your funds without having to pay taxes on any money you withdraw (up to $35,000).

• How can I pay back into my RRSP Home Buyers' Plan?

  Repaying your RRSP Home Buyers’ Plan is a fairly simple process. You just need to make a deposit into your RRSP in the year the repayment is due and designate it as an RRSP Home Buyers’ Plan repayment. You can do this over a period of 15 years until your RRSP Home Buyers’ Plan is repaid in full.

• Can I use my RRSP Home Buyers' Plan to purchase a second home?

  The RRSP Home Buyers’ Plan is reserved for first-time home buyers, which means you won’t be able to use it to purchase a second home. That said, you may be able to use it to purchase a second home four years or more after you’ve sold your first home (if you have not owned a home or shared your spouse’s home in that time period).

• Will I have to pay taxes on my new house?

  Yes. Property tax is handled at the provincial level, and each province has its own rules. Usually, you’ll have to pay property taxes as long as you own your home – even after you’ve satisfied your mortgage. Be sure to look up your local laws (both municipal and provincial) before you buy a home and factor property taxes into your overall cost to make sure you can afford the monthly payments.