First‑Time Home Buyer Guide: Navigating Down Payments and CMHC in Ontario
First‑Time Home Buyer Guide: Navigating Down Payments and CMHC in Ontario
Buying your first home in Ontario can feel overwhelming with acronyms, down payment rules, and mortgages floating around. This guide breaks it down clearly—so you know exactly what to expect and how to make confident decisions.
1. Minimum Down Payment Rules in Canada
- For homes $500,000 or less, you need a 5% down payment (e.g., $25,000 on a $500,000 home).
- If the home price is between $500,000 and $1.5 million, it’s 5% on the first $500,000 and 10% on the remaining amount (e.g., $35,000 on a $600,000 home).
- For properties above $1.5 million, expect a 20% down payment .
These are the minimums; a higher down payment means lower costs and savings over time.
2. Why CMHC Mortgage Insurance Matters
If your down payment is less than 20%, you’ll need mortgage loan insurance, often called CMHC insurance:
- Essential for homes priced under $1 million with <20% down.
- Premiums range from 0.6% to 4.5% of your mortgage, depending on how much you put down .
- Payable upfront or added to your mortgage—meaning you pay interest on that amount too .
It lets you enter the housing market sooner while keeping lenders protected.
3. Key CMHC Insights for Ontario Buyers
- CMHC allows 30-year amortization for insured mortgages on new homes, which lowers monthly payments (available since August 1, 2024) .
- Eligibility perks: you can use gifts from close relatives as down payment funds when buying a 1–4 unit home .
- Watch your income ratios—monthly housing costs should be under 32% of gross income and your total debt under 40% .
These guidelines help you budget and qualify effectively.
4. How CMHC Premiums Impact You
Premium tiers based on down payment:
| Down Payment | CMHC Premium |
|---|---|
| <10% | ~4.5% |
| 10–14.99% | ~3.1% |
| 15–19.99% | ~2.8% |
If you buy a $400,000 home with only 5% down:
- Mortgage = $380,000
- CMHC premium ~4.5% → ~$17,100
- Interest compounds on the full amount (loan + insurance) .
Investing a larger down payment can save significant costs in the long run.
5. First Home Savings Account (FHSA): Your New Ally
As of April 2023, Canadians can use the First Home Savings Account (FHSA)—a blended RRSP/TFSA—to save for a first home.
- Contributions are tax-deductible, and withdrawals for your first home are tax-free.
- You can save up to $8,000/year, with a lifetime cap of $40,000.
- Ideal for accelerating your down payment savings while growing your funds intelligently .
6. Savvy Tips for First-Time Buyers
- Aim for ≥10% down if possible—it significantly reduces your CMHC premium and long-term costs.
- Save with an FHSA to maximize tax benefits and grow your down payment faster.
- Focus on your income ratios: keep housing costs ≤32% and total debt ≤40% of gross income for smoother approvals.
- Plan for closing costs (~1.5–4% of purchase price) covering legal fees, land transfer tax, etc.
- Discuss amortization options—30-year amortization and insured mortgages can make monthly payments more manageable .
Bottom Line
First-time homebuying in Ontario means understanding down payment thresholds, CMHC requirements, and tax-advantaged savings—all without feeling overwhelmed. Anton Mortgage is here to:
- Explain down payment options clearly
- Structure your CMHC strategy smartly
- Help you apply FHSA efficiently
- Keep everything FSRA-compliant and transparent
👉 Ready to explore your personalized plan or calculate your down payment and monthly costs? Reach out via our contact page—no obligations, just honest advice: Contact Anton Mortgage