What Buying a Home in Canada Really Costs

Almost every first-time buyer in Canada budgets for the down payment and assumes that's the hard part. It isn't. Between mortgage default insurance, land transfer tax charged twice in Toronto, a provincial tax that can't be financed, and the ordinary costs of closing, the cash you need on completion day is substantially more than the down payment alone.

A complete worked example

Take a $750,000 home in Toronto, bought by a first-time buyer with 10% down at 4.79% over 25 years. Every figure below is computed with the tools on this site.

Note that the legal minimum down payment here is $50,000 — 5% on the first $500,000 plus 10% on the next $250,000. Our buyer is putting down more than required, which is what drops them from the 4.00% premium band to 3.10%.

So the real cash requirement is $94,799 — the $75,000 down payment plus $19,799 of closing costs. That's 12.6% of the purchase price, not 10%. A buyer who saved exactly $75,000 and nothing more cannot complete this purchase.

The five costs people miss

1. The minimum down payment slides with price

Canada requires 5% on the first $500,000, 10% on the portion between $500,000 and $1.5 million, and 20% on anything above that. Homes over $1.5 million cannot be insured at all, so 20% becomes mandatory rather than merely advisable.

A $700,000 home therefore needs $45,000 — that's 6.43%, not 5%. Buyers who budget a flat 5% at this price level are short by $10,000.

2. You pay interest on the insurance premium for 25 years

The CMHC premium is almost always rolled into the mortgage, which feels painless. In our example the $20,925 premium adds about $119 to the monthly payment — and over the full amortization it costs $35,763 in payments. You are financing insurance that protects your lender, not you, and paying interest on it for a quarter of a century.

3. The PST on the premium must be paid in cash

Ontario, Quebec, Manitoba and Saskatchewan charge provincial sales tax on the insurance premium. Unlike the premium itself, this tax cannot be added to the mortgage. In our example it's $1,674 due on closing day — a number that appears on the lawyer's statement of adjustments and surprises buyers who had budgeted to the dollar.

4. Toronto charges land transfer tax twice

Buy inside the City of Toronto and you pay the provincial tax plus a municipal tax that mirrors it — effectively double. On our $750,000 home that's $22,950 before rebates. The same house in Mississauga or Hamilton would attract only the provincial half.

The first-time buyer rebates are genuinely valuable here: $4,000 provincially and $4,475 municipally, $8,475 combined. Confirm your eligibility carefully, because most provinces require that you have never owned a home anywhere in the world.

5. Your monthly cost isn't the mortgage payment

The mortgage on our example is $3,964.74 a month. The actual cost of occupying the house is:

That's 17% above the mortgage payment alone — before maintenance, which a common rule of thumb puts at 1% of the home's value annually, or another $625 a month on this property.

Two Canadian rules that catch everyone

The stress test qualifies you at a rate you won't pay

Federally regulated lenders must approve you at the greater of your contract rate plus 2%, or 5.25%. At 4.79% you're assessed as though the rate were 6.79%. This feels punitive until you consider the households who bought at 2% in 2021 and renewed at 6% five years later — they largely coped because they'd been qualified near 4.75%. The affordability calculator shows both payments.

Term and amortization are different things

Your amortization is typically 25 years; your term is typically 5. At the end of the term you still owe most of the balance and must renew at whatever rates exist then. On a 25-year amortization you'll do this four more times, and each renewal is a real risk. Before committing, check what your payment becomes if rates are two points higher at renewal — the Canadian mortgage calculator shows your balance at end of term for exactly this purpose.

How much should you actually have saved?

A practical target before you start seriously shopping:

• Down payment — at least the legal minimum for your price band, ideally more to cross a premium threshold
• Closing costs — 1.5% to 4% of the purchase price, in cash
• An emergency fund that survives the purchase — three to six months of expenses, still intact after closing
• Immediate costs — moving, appliances, the repairs the inspection found

The third item is the one buyers most often sacrifice, and it's the one that turns a manageable setback into a crisis. Emptying your savings entirely into a house means the first furnace failure goes onto a credit card at 22%. Our emergency fund guide covers sizing it properly, and the savings goal calculator will tell you the monthly amount required to get there.

A note on the numbers here

Every figure in this guide was produced by the calculators on this site rather than estimated, using rates current as of August 2026. CMHC premium bands, land transfer tax brackets, rebate amounts and the stress-test rule all change from time to time, and provincial rules vary in ways a general guide cannot fully capture. Treat this as a realistic planning framework, and confirm the specifics with your mortgage broker and real estate lawyer before you commit to anything.