Buying your first home: down payment, insurance and closing costs

Buying a first home comes with two price tags. There's the price on the listing, and there's everything it takes to get the keys: the down payment, insurance if you put down less than 20%, land transfer tax, and a handful of fees that arrive on closing day. This lesson walks through each one for an Ontario purchase.

The down payment

The down payment is the part of the price you pay yourself. In Canada, the minimum depends on the price. As of 2026 it's 5% of the first $500,000 and 10% of the part above that, for homes under $1.5 million. At $1.5 million or more, it's 20%.

On a $600,000 home, that works out to $25,000 plus $10,000, so $35,000, or about 5.8%.

Mortgage default insurance

Put down less than 20% and the mortgage needs mortgage default insurance from CMHC, Sagen or Canada Guaranty. It protects the lender if the loan isn't repaid, not you. The premium is a percentage of the mortgage, from 4.00% at the smallest down payments down to 2.80% just below 20%, and it's normally added to the mortgage balance.

On the $600,000 home with $35,000 down, the premium is about $22,600, which brings the mortgage to about $587,600. In Ontario there's also 8% provincial sales tax on the premium, about $1,808 here, and that part can't be added to the mortgage. It's paid in cash at closing.

Help with saving

Two federal programs can make the down payment go further, and many buyers use both.

The First Home Savings Account (FHSA) lets you put in up to $8,000 a year, to a lifetime total of $40,000. Contributions are tax-deductible like an RRSP, and withdrawals for a qualifying first home are tax-free like a TFSA. You need to be at least 18, a resident of Canada, and a first-time buyer, which broadly means you haven't lived in a home you or your spouse owned in the current year or the previous four.

The Home Buyers' Plan (HBP) lets you withdraw up to $60,000 from your RRSP toward a first home. It's a loan to yourself: it's generally repaid to the RRSP over 15 years, starting in the second year after the withdrawal.

Couples buying together can each use both, subject to the rules for each. The Canada Revenue Agency's pages are the place to confirm the details for your situation.

Land transfer tax

Ontario charges land transfer tax on every purchase, on a sliding scale by price. First-time buyers get a refund of up to $4,000. Buying in Toronto adds a second, municipal tax, with its own first-time rebate of up to $4,475.

$600,000 home, first-time buyer	Outside Toronto	In Toronto
Tax before refunds	$8,475	$16,950
First-time refunds	−$4,000	−$8,475
Paid at closing	$4,475	$8,475

The other closing costs

A real estate lawyer handles the purchase, and legal fees with disbursements often run around $1,500 to $2,500. Most buyers also pay for a home inspection, often $400 to $600, and title insurance. There are adjustments too: if the seller has prepaid property tax or utilities past the closing date, you reimburse them for your share.

Lenders want to see that you've set aside money for these costs on top of the down payment. A common rough guide is 1.5% to 4% of the price, depending on where you buy and whether land transfer tax applies in full. On the $600,000 home, the example adds up like this:

Cash needed at closing (outside Toronto)	Estimate
Down payment	$35,000
Sales tax on the insurance premium	$1,808
Land transfer tax after refund	$4,475
Legal fees, inspection and title insurance	about $3,000
Total	about $44,300

Moving costs, furniture and the first few months of repairs come after that, and they're easy to underestimate.

Where to go next

Saving the cash is half of it. The other half is whether a lender will approve the mortgage, and for how much. That's the next lesson.