Buying your first home in Toronto? Prices are high, lenders are strict, and if you do not run the numbers properly, it is easy to end up house poor fast. The good news is that 2026 gives first-time buyers more options than the market has seen in a while - more listings, more negotiating power, and better strategies. With so much inventory available in the market, and so many incredible homes to look at, you are guaranteed to find a house or condo you love. The one factor that sets you apart as a first-time buyer is that you do not have to sell in order to buy, so your purchase decision is not contingent upon the sale of another home. No bidding wars are driving up prices, no multiple offers, and sellers are motivated. Browse all Toronto listings to see what is currently on the market, or check our mortgage affordability guide to find out how much you can actually borrow.
Government Programs and Rebates
| Program | What You Get | Max Value |
|---|---|---|
| Home Buyers' Plan (HBP) | Tax-free RRSP withdrawal for down payment | $60,000 |
| First Home Savings Account (FHSA) | Tax-free savings for buying a home | $40,000 |
| Land Transfer Tax Rebates | Ontario + Toronto rebates combined | Up to $8,475 |
| First-Time Home Buyers' Tax Credit | Federal tax credit at closing | $1,500 |
| Multigenerational Home Renovation Credit | Tax credit for building a suite | Up to $7,500 |
First Home Savings Account (FHSA)
The FHSA is a powerful savings tool designed for first-time buyers. You can contribute up to $8,000 per year, with a lifetime max of $40,000. Contributions are tax-deductible like an RRSP, reducing your taxable income. Withdrawals are tax-free when used to buy your first home, like a TFSA. If you do not use the funds for a home, you can transfer to an RRSP or cash out with taxes applied. The account must be open for at least one year before you can make a qualifying withdrawal, so start early.
Home Buyers' Plan (HBP)
The Home Buyers' Plan lets you borrow up to $60,000 tax-free from your Registered Retirement Savings Plan (RRSP) to use as a down payment on your first home. You must plan to live in the home as your principal residence within one year of buying it. You have two years after withdrawal before repayment begins, and you must repay the full amount over 15 years in equal annual instalments. Missed payments are added to your taxable income for that year, so stay on top of it. For a couple, if each individual has their own RRSP and can withdraw $60,000 each, they can withdraw a combined total of up to $120,000. The FHSA and HBP can be used together, giving a single buyer access to as much as $100,000 in tax-advantaged down payment funds.
Ontario and Toronto Land Transfer Tax Rebates
Toronto is unique in Canada because buyers pay both a provincial and a municipal land transfer tax. You can recover up to $8,475 in total between Ontario and Toronto if you qualify as a first-time home buyer. The Ontario Land Transfer Tax Rebate covers up to $4,000. The Toronto Municipal Land Transfer Tax (MLTT) Rebate covers up to $4,475 (Toronto charges an extra LTT on top of Ontario's). The eligibility definition here is stricter than for HBP/FHSA - you must never have owned a home anywhere in the world. Your spouse must also have never owned a home during your marriage or common-law partnership. You must move into the home and make it your principal residence within 9 months of closing. You must be at least 18 years old and a Canadian citizen or permanent resident. You must apply at the time of registration of the property, usually through your lawyer. If you miss it, you can still apply for a refund within 18 months.
First-Time Home Buyers' Tax Credit (HBTC)
Just for buying your first home, you could get a $1,500 tax break from the federal government. You can claim 15% of up to $10,000 in qualifying expenses - think legal fees, inspections, and other upfront costs. That works out to a $1,500 federal tax credit. There is no separate application process - simply include it when you file your tax return.
Down Payment Requirements
Down payment requirements in Toronto vary by purchase price. Under $500,000: minimum 5% down. $500,000 to $1.5 million: 5% on the portion below $500k, 10% on the portion above. $1.5 million and up: minimum 20%, as mortgage insurance is not available at this price point. For homes under $1.5 million with less than 20% down, CMHC insurance or a similar mortgage default insurance premium costs between 2.8% to 4.0% of the mortgage amount. The insurance premium is added to your mortgage so you do not pay it upfront. Minimum credit score required is typically 680+. The federal government increased the cap on insured mortgages to $1.5 million from $1 million, and purchasers can now take out loans for a 30-year amortization period if they are first-time homebuyers or buying a newly built house.
Understanding the Mortgage Stress Test
The stress test was designed by OSFI and is intended for potential homeowners borrowing through federally regulated lenders such as banks. The test may not apply to provincially regulated credit unions, private mortgage lenders, or b-lenders. It aims to prevent consumers from getting themselves into unmanageable debt by taking on a mortgage that is too big for them. The minimum qualifying rate is 5.25% or the contracted rate plus 2 points, whichever is the higher. This applies to both insured and uninsured mortgages. Your Gross Debt Service (GDS) ratio - the percentage of your income allocated to monthly house expenses including mortgage, utilities, and property taxes - should be less than 39% of your monthly income. Your Total Debt Service (TDS) ratio - which adds in all other debts like credit cards, student loans, and car payments - should be less than 44% of your monthly income. To prepare, pay down your existing debt first. Your lender will look at all the debt that you currently carry and factor it into whether or not you are eligible. The smaller your current debt load, the lower your TDS will be, which may help improve your chances of getting approved. Be realistic about how much house you can afford - this will increase your odds of passing the stress test and prevent you from becoming house-poor.
Step-by-Step Buying Process
1. Get a mortgage pre-approval. This is the critical first step. A formal pre-approval provides written verification (typically valid 90-120 days) with an interest rate guarantee. Lenders evaluate your income, debts, down payment amount, and credit history. A mortgage pre-approval will tell you how much you qualify for, and a good mortgage broker will guide and educate you on the process. 2. Think about what you can actually afford. Think about your monthly costs - what can you afford to pay per month for your mortgage? Insurance, public transit pass or car loan, grocery bills, entertainment and anything else you pay every month that will impact your home costs. Just because you are approved for a certain amount does not mean that is what you should actually spend. 3. Choose your mortgage type. The mortgage term - typically 6 months to 5 years - represents the lending period. The amortization period, often 25 years, determines your payment schedule. The longer the amortization period, the lower your payments, but you will pay more total interest. Fixed-rate mortgages lock your rate for the entire term, protecting against rising rates. Variable-rate mortgages adjust with the bank's prime rate. 4. Find a neighbourhood. Toronto has 158 neighbourhoods across 25 wards. Consider school quality and proximity, public transit access, shops and restaurants, property types and age, demographics and safety. 5. Search for homes and make an offer. Upon finding the right property, you present an Agreement of Purchase and Sale (APS) - a legally binding document containing price, deposit amount (typically 5%, due within 24 hours of acceptance), closing date, inclusions, and conditions. Common conditions include financing, home inspection, and status certificate review. Sellers can accept as-is, counter with different terms (the most common scenario), or decline entirely. Back-and-forth negotiations typically occur until mutually acceptable terms emerge. 6. Home inspection. Always arrange a professional inspection, even in a competitive market. Include contingencies for financing and home inspections to protect yourself from unexpected costs. 7. Closing. Closing costs typically range between 3% to 4% of your home's purchase price. These include your deposit (approximately 5% of purchase price), property appraisal ($400-500), home inspection ($400-700), legal fees ($1,800-3,000), title insurance ($250-400), Ontario Land Transfer Tax, Toronto Land Transfer Tax, and property tax adjustments. Once all of the documents have been signed and funds are transferred, the keys to your new home will be handed over to you.
Ongoing Costs After Purchase
Budget for property taxes, home insurance, water/sewage/garbage, hydro and gas, condo fees if applicable, and maintenance at roughly 1-3% of home value annually.
Smart Strategies for Toronto Buyers
Instead of trying to own in a high-demand neighbourhood where homes barely cash flow, consider renting in the area you actually want to live in - maybe it is downtown, close to work, lifestyle, or transit - and then buy a property where the numbers work, usually outside the core where you can get multi-units and better value. Another option is house hacking: you buy a house with a basement suite, live in one unit, and rent out the others to help cover the mortgage. You pay less tax on rental income since you are living there, you get the capital gains tax exemption on the portion you live in when you sell, and part of what you are paying monthly is not lost - it is going toward your mortgage paydown and building equity.
Neighbourhood Recommendations for First-Time Buyers
Not every Toronto neighbourhood demands seven-figure prices. Consider these areas where entry-level homes and condos remain relatively affordable:
- Scarborough: Condos and townhouses starting under $500,000, with solid transit connections
- Etobicoke: A mix of older condos and semi-detached homes, with access to the Bloor-Danforth line and Kipling GO station
- East York: Small bungalows and stacked townhouses with strong community character
- North York: Yonge and Sheppard corridor offers condo options near the subway For a full breakdown of Toronto's top areas, read our best neighbourhoods guide.
Additional Resources
Explore the cost of living in Toronto to understand ongoing expenses beyond your mortgage, review current market trends, or browse affordable homes for sale. You can also visit the Toronto city guide for an overview of the city's lifestyle, transit, and amenities.