Mortgage Financing Simplified: Ontario Homebuyers -

Financing is one of the most important steps in buying a home in Ontario. Lenders want to know you can afford the purchase, and they’ll review your income, credit history, and down payment before approving your mortgage. When you understand how down payments, insurance, the stress test, and lender criteria work, the process feels far more manageable.

Minimum Down Payment in Ontario

The size of your down payment depends on the purchase price of your home.

Minimum Down Payment by Home Price

Home Price	Minimum Down Payment	Mortgage Insurance Availability
Up to $500,000	5% of the purchase price	Yes, if you qualify
$500,001 – $1,499,999	5% of the first $500,000 + 10% of the remaining amount	Yes, if you qualify
$1,500,000+	20% minimum	Not available, must use conventional financing

Examples

On a $600,000 home, the minimum down payment would be $35,000 (5% of $500,000 = $25,000, plus 10% of $100,000 = $10,000).
On a $1.5M home, the minimum down payment is $300,000 (20%). Mortgage default insurance is not available.

For more details on rebates that can help reduce upfront costs, see our Ontario Home Buyer Incentives guide.

The Mortgage Stress Test

Since 2018, all Canadian buyers must qualify under the mortgage stress test. This means your lender will calculate affordability at the greater of your contract rate plus two percent or 5.25 percent. The rule applies whether you have an insured or conventional mortgage.

The purpose is to make sure buyers can handle higher payments if interest rates rise. For example, if you secure a rate of 4.8 percent, you must show you could still afford the payments at 6.8 percent. Most new buyers are subject to this test, though some straightforward renewals may be exempt.

What Lenders Look For

Beyond the down payment, lenders assess your overall financial picture. Expect them to review:

Credit score: Most lenders require 680 or higher for insured mortgages, though some will accept lower with additional conditions.
Debt service ratios: Gross Debt Service (GDS) should be under 39 percent, and Total Debt Service (TDS) under 44 percent.
Employment and income stability: Lenders typically want at least two years of steady income history.
Existing debts and obligations: This includes car loans, credit cards, and other monthly commitments.

For a broader look at how these checks affect your closing, see Closing Day in the GTA: What to Expect.

Tips for Strengthening Your Mortgage Application

Pay down high-interest debt before applying.
Avoid major credit purchases such as cars or furniture before closing.
Get pre-approved to understand your borrowing limit and lock in a rate.
Save for closing costs, which are typically two to four percent of the purchase price in Ontario.

Types of Mortgages

Ontario buyers typically choose between three main mortgage types.

Fixed-Rate Mortgage

The interest rate stays the same for the entire term. It’s a good choice if you want stable payments and easier budgeting.

Variable-Rate Mortgage

The interest rate changes with the lender’s prime rate. Payments can fluctuate, but you may save money if rates fall.

Hybrid or Combination Mortgage

Part of the loan is fixed and part is variable. This structure gives some payment stability while still allowing flexibility.

Insured vs. Conventional Mortgages

If your down payment is less than 20 percent and the purchase price is under $1.5M, your mortgage must be insured by CMHC, Sagen, or Canada Guaranty. The premium is added to your mortgage, but in Ontario the 8% provincial sales tax on that premium must be paid at closing.

If you put down 20 percent or more, or the purchase price is over $1.5M, your mortgage is considered conventional and no default insurance is required.

Mortgage Default Insurance: What You Need to Know

Mortgage default insurance protects the lender if you stop making payments, not the buyer. In return, it allows buyers with smaller down payments to qualify for financing.

In Canada, there are three mortgage insurers:

CMHC (Canada Mortgage and Housing Corporation): Government-backed
Sagen™: Formerly Genworth Canada, private insurer
Canada Guaranty: Private insurer

Premiums depend on the size of your down payment. The smaller your down payment, the higher the premium percentage. The cost is added to your mortgage balance, but in Ontario you must pay the provincial sales tax on the premium at closing.

Closing Costs to Budget For

Land Transfer Tax

Ontario charges land transfer tax on every home purchase. Buyers in Toronto pay both provincial and municipal tax, which doubles the total. On a $1,000,000 home, Ontario’s land transfer tax is $16,475. In Toronto, the additional municipal tax adds another $16,475, for a total of $32,950.

First-time buyers may qualify for rebates of up to $4,000 provincially and $4,475 in Toronto.

Legal Fees and Title Insurance

Buyers also need a lawyer to complete the transaction. Legal fees in Ontario generally range between $1,500 and $2,500 plus disbursements. Title insurance adds another $250 to $400 and protects against fraud, defects, or survey issues. Your lawyer will arrange both for you.

Boosting Your Down Payment

The federal government provides two programs that can help buyers increase their down payment.

The First Home Savings Account (FHSA) allows annual contributions of up to $8,000, with a lifetime maximum of $40,000. Contributions are tax-deductible and withdrawals are tax-free if used for a qualifying home purchase.

The Home Buyers’ Plan (HBP) allows buyers to withdraw up to $60,000 from registered retirement savings plans. The funds must be repaid over 15 years.

You can combine the FHSA and HBP if you qualify, which can make a significant difference when saving for a first home.

FAQs About Mortgage Financing in Ontario

What is the stress test and why does it matter?
It is a federal rule that requires buyers to qualify at a higher interest rate than they are actually paying. It protects borrowers against future rate increases.

How do I know if my mortgage is insured or conventional?
If your down payment is less than 20 percent and the home costs under $1.5M, your mortgage will be insured. Otherwise, it will be conventional.

Are legal fees and title insurance mandatory?
Yes. You need a lawyer to close your purchase, and they will arrange title insurance for you. Together these usually cost between $1,750 and $2,900.

Can I combine the FHSA and Home Buyers’ Plan?
Yes. Buyers who qualify can use both programs to maximize their down payment.

What is the biggest difference between fixed and variable mortgages?
Fixed mortgages provide stability since your payments do not change, while variable mortgages may cost less if rates fall but carry more risk if rates rise.

Final Thoughts

Mortgage financing in Ontario can feel complicated at first, but when you understand how down payments, the stress test, lender requirements, and closing costs work, the path to homeownership becomes much clearer.

Keith and I work with buyers across the GTA and Niagara Region to plan for financing and navigate the buying process with confidence. Reach out for a personalized mortgage overview and to learn more about our Closing Day Checklist and Cost Breakdown.