Buying a home in Ontario: the money side, start to finish

The down payment is the number everyone knows. These are the ones that catch people out, and all of them are due in cash:

• Land transfer tax. Charged in steps by Ontario, and again by the City of Toronto if the home is inside the city limits. It cannot be added to the mortgage.
• Legal fees, title insurance and registration. Your real estate lawyer handles the transfer and the mortgage.
• Adjustments. You repay the seller for property tax, utilities or condo fees they prepaid past the closing date.
• Inspection, appraisal, moving, and the first month of everything.

A workable rule: have the down payment, plus the land transfer tax from the calculator, plus a cushion for the rest. Then keep an emergency fund you do not touch. A house with no cash behind it is how a furnace repair ends up on a credit card.

The federal minimum is 5 percent of the first CAD 500,000 and 10 percent of the rest. Once the price reaches CAD 1.5 million the minimum is 20 percent. With less than 20 percent down, the lender requires mortgage default insurance and the premium is added to the loan.

Then comes the stress test. For an uninsured mortgage, federally regulated lenders must check that you could still pay at the greater of your contract rate plus 2 percent or 5.25 percent. A couple offered 4.6 percent is tested at 6.6 percent. That is why the amount you are approved for is lower than the payment you can afford today.

Confirm the down payment rules with your lender or mortgage broker before you bid. Lenders add their own conditions for self-employed income, rental properties and newcomers.

Three things stack, and most buyers use only one of them.

1. The first home savings account

You can contribute CAD 8,000 a year, to a lifetime limit of CAD 40,000. The contribution is deducted from your income like an RRSP, and a qualifying withdrawal to buy your first home is tax-free like a TFSA. At CAD 100,000 of income in Ontario, an CAD 8,000 contribution cuts 2026 income tax by about CAD 2,398. A couple can each have one.

2. The Home Buyers' Plan

You can withdraw up to CAD 60,000 from your RRSP toward a first home without paying tax on it. It is a loan from yourself: the amount goes back into the RRSP over 15 years, and any year you miss a repayment, that amount is added to your income.

3. Land transfer tax rebates

Ontario refunds up to CAD 4,000 of its land transfer tax to first-time buyers. Toronto rebates up to CAD 4,475 of its own. If only one of two buyers qualifies, the refund is reduced in proportion.

Lenders use two ratios: housing costs against gross income, and all debt payments against gross income. Our mortgage calculator runs both at the qualifying rate.

The lender's maximum is not a recommendation. It ignores child care, a second car, retirement saving and the fact that your take-home pay is far below your gross. A household earning CAD 170,000 takes home about CAD 128,372 after tax, CPP and EI if the incomes are CAD 110,000 and CAD 60,000. Build the budget on that number, not the gross.

Before you bid, put the new payment, property tax, insurance and utilities into a family budget and live on what is left for three months. If it is uncomfortable now, it will not improve with a mortgage.

• The home you live in. When you sell, the gain is generally sheltered by the principal residence exemption. A family can designate one property for each year.
• Renting part of it. Rent from a basement unit is income. You report it and deduct a fair share of the costs.
• Keeping the old place as a rental. Changing a home to a rental is treated as a sale at market value on that day. An election can defer this, and it has to be filed on time.
• Selling within 12 months. Profit on a home held less than a year is generally taxed as business income, in full, with exceptions for life events such as a death, a new job or a separation.
• A parent on title. If a parent owns part of a home they do not live in, their share of any gain is not covered by your exemption.

Canada has no gift tax, so a parent can give an adult child a down payment. The lender will ask for a signed gift letter saying it is not a loan.

The choice between a gift, a loan, a co-signature and co-ownership matters more than families expect. A gift is clean but gone. A loan can be protected in a separation if it is documented properly, which is a job for a lawyer. A co-signer is liable for the whole mortgage. A co-owner who has owned a home before reduces the first-time buyer refund and creates a taxable gain on their share later.

Decide which one you are doing before the offer, not at the lawyer's desk.