Getting a mortgage in Canada involves a few key steps that differ from the US process — including a mandatory stress test, CMHC mortgage insurance rules, and shorter term lengths that require periodic renewal. This guide walks Canadian first-time buyers through everything you need to know to get approved and into your first home.
Step 1: Understand the Canadian Mortgage Basics
Canadian mortgages differ from US mortgages in a few important ways:
- Amortization period: Up to 25 years for insured mortgages (less than 20% down); up to 30 years for uninsured (20%+ down). The 2024 federal budget extended insured amortizations to 30 years for first-time buyers purchasing new builds.
- Mortgage term: Typically 1–5 years (most common: 5-year fixed). At the end of each term, you renew at the current rate — your rate is not locked in for the full amortization period.
- Mortgage insurance (CMHC): Required on all mortgages with less than 20% down. Premium ranges from 2.8% to 4% of the mortgage amount, depending on your down payment size.
- Stress test: All borrowers — regardless of down payment — must qualify at the greater of the contract rate + 2% or 5.25%. This limits how much you can borrow.
Step 2: Save Your Down Payment
In Canada, minimum down payment requirements are:
- Homes under $500,000: 5% minimum
- Homes $500,000–$999,999: 5% on the first $500,000 + 10% on the remainder
- Homes $1,000,000+: 20% minimum (not eligible for CMHC insurance)
Take advantage of the First Home Savings Account (FHSA) to save your down payment tax-free. Contribute up to $8,000/year (lifetime max $40,000) and get a tax deduction, with tax-free withdrawals at purchase. Combine with the Home Buyers’ Plan (HBP) to also withdraw up to $60,000 from your RRSP. See our full list of first-time buyer programs in Ontario, Alberta, and British Columbia.
Step 3: Check Your Credit Score
Canadian lenders use your credit score (from Equifax or TransUnion Canada) to assess your mortgage application. General guidelines:
- 680+: Qualifies for most lenders and best rates
- 600–679: May qualify with some lenders; higher rate likely
- Below 600: Difficult to qualify with A-lenders; consider B-lenders or credit unions
Check your credit report for free at Equifax Canada or TransUnion Canada before applying. Dispute any errors, as they can drag down your score unnecessarily.
Step 4: Understand the Mortgage Stress Test
The mortgage stress test (B-20 guideline) requires you to qualify at the higher of:
- Your actual mortgage rate + 2%, or
- 5.25% (the floor rate, as of 2026)
For example, if you’re offered a 5-year fixed rate of 4.5%, you must qualify as if the rate were 6.5%. This effectively reduces your maximum purchase price — plan accordingly when setting your budget.
Step 5: Get Mortgage Pre-Approval
A mortgage pre-approval tells you exactly how much a lender will lend you and locks in a rate for 90–120 days while you shop for a home. To get pre-approved, you’ll need:
- Last 2 years of Notice of Assessments (NOAs) from the CRA
- Recent pay stubs or letter of employment
- Last 3 months of bank statements (showing down payment)
- Government-issued ID
- SIN for credit check
If self-employed, you’ll also need 2 years of T1 Generals showing business income.
Step 6: Choose Between Fixed and Variable Rate
Fixed-Rate Mortgage
Your interest rate is locked in for the full term (most commonly 5 years). Your payment stays the same regardless of what happens to interest rates. Provides certainty — popular with first-time buyers who want predictability.
Variable-Rate Mortgage (VRM)
Your rate fluctuates with the Bank of Canada’s prime rate. Variable rates have historically been lower than fixed rates over time, but payments can rise if rates increase. Two types: variable-rate (payment changes with rate) and adjustable-rate (payment stays the same but amortization length changes).
Step 7: Choose a Lender
Canadian mortgage options include:
- Big Six banks (RBC, TD, Scotiabank, BMO, CIBC, National Bank) — convenient but not always the best rates
- Monoline lenders (First National, MCAP, etc.) — mortgage specialists who often offer better rates and terms
- Credit unions — can be more flexible on qualifying criteria
- Mortgage brokers — shop your application to dozens of lenders on your behalf, at no cost to you (paid by the lender)
Using a mortgage broker is often the best way to ensure you’re getting a competitive rate, especially as a first-time buyer who may not know which lenders are most flexible for your situation. Compare rates through Ratehub.ca to see current offers from multiple lenders.
Step 8: CMHC Mortgage Insurance
If your down payment is less than 20%, your mortgage must be insured through CMHC (Canada Mortgage and Housing Corporation), Sagen, or Canada Guaranty. The insurance premium is added to your mortgage:
- 5–9.99% down: 4.00% premium
- 10–14.99% down: 3.10% premium
- 15–19.99% down: 2.80% premium
On a $500,000 mortgage with 5% down, the 4% CMHC premium adds $19,000 to your loan — spread over your amortization period. The good news: insured mortgages get better rates because lenders take on less risk.
Step 9: Make an Offer and Close
Once your offer is accepted, your lender processes the full mortgage application. A lawyer or notary handles the closing — in Canada, real estate lawyers are typically involved in the closing process (not escrow officers as in the US). Budget for closing costs of approximately 1.5–4% of the purchase price, including legal fees, land transfer tax, and home inspection.
Frequently Asked Questions
How long does mortgage approval take in Canada?
Pre-approval can take a few days to a week. Full approval after an accepted offer typically takes 1–2 weeks. Allow 30–45 days from offer to closing.
Can I break my mortgage before the term ends?
Yes, but penalties apply — typically 3 months’ interest for variable-rate mortgages or the Interest Rate Differential (IRD) for fixed-rate mortgages. IRD penalties can be significant on fixed mortgages with large rate differences. Understand the prepayment penalty before choosing a lender.
What’s the First Home Savings Account (FHSA)?
The FHSA lets first-time buyers contribute up to $8,000/year ($40,000 lifetime) in a registered account. Contributions are tax-deductible and withdrawals for a qualifying home purchase are tax-free. It’s one of the best tools available for saving a down payment in Canada.
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