First-time homebuyers’ guide

Step 1: Assess what you can afford

Your ability to afford a home depends on multiple factors, including your income, existing debts and credit score.

To determine a realistic budget, consider the following:

• Use the IG mortgage affordability calculator: work out how much you can spend on a home, taking into account your income, down payment and other debts.
• Income versus expenses: review your household cash flow.
• Determine your mortgage qualification amount: read more about how to get a mortgage pre-approval.
• Credit score: a score of 670+ is considered good for a mortgage qualification. Read more about credit scores here.  
• Mortgage stress test: lenders assess whether you’ll be able to handle payments if interest rates rise. You can use the Government of Canada's mortgage qualifier tool to conduct a mortgage stress test.

Step 2: Plan your down payment

You can use our mortgage affordability calculator to work out the down payment you’ll need.

2.1 The minimum down payment on a home depends on the purchase price

• Homes under $500,000: 5% of the purchase price.
• Homes between $500,000 and $1.5 million: 5% on the first $500,000, 10% on the remaining amount.
• Homes $1.5 million and above: 20% down payment required.

2.2 Building your down payment

There are two tax-efficient options to help you save for your down payment:

• First Home Savings Account (FHSA): a tax-free savings account for first-time buyers. Learn more about FHSAs here.
• Home Buyers’ Plan (HBP): withdraw up to $60,000 from your RRSP tax-free.

Step 3: Choosing the right mortgage

Your mortgage is typically your most significant financial commitment, and choosing the right mortgage can have a lasting impact on your financial well-being. The ideal mortgage solution should align with your lifestyle, support your savings goals, and help you achieve your long-term objectives.

• Fixed-rate mortgages: these provide consistent payments and can be a good option if rates are low and unlikely to drop much further.     
• Variable-rate mortgages: Interest rates fluctuate with the Bank of Canada’s overnight rate and may offer lower rates than fixed-rate mortgages. Read more about whether you should lock in a variable-rate mortgage here and find out more about a fixed vs. variable mortgage here.
• IG Home Equity Plan (HEP): as the equity in your home grows, you can access it to help cover future expenses. Learn more about a home equity line of credit and how it works.

Tip: Learn how a mortgage can help boost your financial plan here.

Connect with an IG Advisor to determine the best mortgage solution tailored to your financial plan.

Step 4: Making an offer and closing

To ensure a smooth transaction, carefully review your ownership structure and follow the necessary steps from making an offer to closing the deal.

4.1 Understanding ownership structures

• Freehold: you own both the land and the building.
• Condominium: you own the unit but share common areas and fees.

4.2 Steps to making an offer

1. Prepare your offer: determine your purchase price, conditions and deposit amount.
2. Negotiate: be prepared to discuss terms and conditions with the seller.
3. Legal review: have a lawyer review your purchase agreement.

4.3 Closing costs to keep in mind

• Land transfer taxes.
• Legal fees.
• Title insurance.
• Property appraisal costs.

Tip: eight things to avoid when buying a home.

Step 5: Document checklist

Ensure you have these essential documents when applying for a mortgage:

• Income verification (T4s, pay slips, letter of employment, tax returns if self-employed).
• Social insurance number and two forms of government ID.   
• A list of your assets.       
• The purchase and sale agreement.
• Proof of the down payment (bank statements, RRSP statements, gift letter).

Helping your children buy their first home the right way

If you’re a parent looking to help your child buy their first home, there are several ways you can do it:

• Gifting money towards the down payment: you would need to provide a signed letter stating that it is a gift and not a loan.
• Co-signing the mortgage: you’ll make it easier for your child to qualify for a mortgage, but you’ll also be on the mortgage and will be jointly responsible for payments.
• Being a guarantor: you’ll provide security for the lender without being on the mortgage.

Things to think about when determining the best way to help your kids:

• Tax implications: gifts are generally tax-free but be mindful of future estate planning. Loans may have income attribution considerations.
• Long-term financial impact: understand the potential impact on your retirement and clearly define how the loan will impact your will and your other children’s inheritances.
• Legal considerations: ensure the ownership structure is clear (if you’ll be a joint owner or not) and that legal agreements are in place.

Connect with an IG Advisor to determine the best mortgage solution tailored to your financial plan.