A client sat across from me last month with $350,000 saved for a down payment. Strong credit, solid income, no debt — an ideal file on paper. We started walking through numbers on the property he wanted, and when I got to closing costs, he stopped me.

Wait — that’s on top of the down payment?

He’d spent two years saving toward 20% down and hadn’t budgeted a dollar for land transfer tax, lawyer fees, or any of the other costs that come due on closing day. He was about $20,000 short of where he thought he was.

That same week, another first-time buyer called — a woman with $30,000 saved, convinced she couldn’t afford anything in Toronto. She’d been told by a family member that she needed at least 20% down to buy a home. When I told her $30,000 was more than enough for a $500,000 purchase, she didn’t believe me.

Two buyers. Opposite assumptions. Both surprised. This is the article I wish every first-time buyer would read before they start saving.

The 20% Number

I don’t know who decided 20% down was the target every buyer should aim for, but it’s the most persistent piece of mortgage advice out there — and for most first-time buyers, it’s the wrong one.

In Canada, the minimum down payment is 5% on the first $500,000 of a purchase price, and 10% on the portion above that. So on a $700,000 home, your minimum is $45,000 — not $140,000.

And as of recent federal changes, insured mortgages now cover purchases up to $1,499,999. That’s a massive shift for Toronto buyers. A year ago, if you were looking at anything above $999,999, you needed a minimum of 20% down — no exceptions. Now a buyer purchasing a $1.2 million home can put down as little as $95,000 instead of $240,000. That opens doors that were completely shut before.

When you put less than 20% down, you pay mortgage insurance through CMHC, Sagen, or Canada Guaranty. The premium depends on your down payment percentage — on a $600,000 purchase with 5% down, the premium is roughly $22,800, and it gets rolled directly into your mortgage. Monthly impact: about $100–$110.

Here’s the part that surprises people: insured mortgages often qualify for lower interest rates than uninsured ones. The lender carries less risk because the insurer is backing the loan, so they pass that savings on to you. The insurance isn’t a penalty — it’s a tool.

The Costs Nobody Warns You About

The down payment gets all the attention. But it’s the closing costs that catch first-time buyers off guard — because nobody talks about them until you’re already committed.

Here’s what you’re looking at on a typical Toronto purchase around $600,000:

• Land transfer tax — Ontario charges ~$8,475 and Toronto adds its own municipal tax of ~$7,725. That’s roughly $16,200 combined. First-time buyer rebates reduce this significantly — Ontario rebates up to $4,000 and Toronto rebates up to $4,475 — but you’re still looking at several thousand dollars out of pocket.
• Lawyer fees — $1,500 to $2,500
• Title insurance — $300 to $500
• Home inspection — $400 to $600
• Appraisal (if required) — $300 to $500
• Adjustments — prepaid property tax, utility credits, and other items that get prorated between you and the seller on closing day

All in, you’re looking at $15,000 to $25,000 or more on top of your down payment. This is the number that blindsides people — and unlike the down payment, most of these costs can’t be rolled into the mortgage. You need cash on hand.

Programs That Actually Help

The good news: there are programs designed specifically for first-time buyers that can offset a significant chunk of these costs. The problem is, most people don’t find out about them until after they’ve bought.

• FHSA (First Home Savings Account) — Contribute up to $8,000 per year, $40,000 lifetime. Contributions are tax-deductible like an RRSP, and withdrawals for a home purchase are tax-free like a TFSA. If you haven’t opened one yet, start now — even if you’re a few years out from buying.
• RRSP Home Buyers’ Plan — Withdraw up to $60,000 from your RRSPs tax-free toward a home purchase. You repay it over 15 years.
• First-Time Home Buyer Tax Credit — A $10,000 non-refundable credit worth up to $1,500 back at tax time.
• Land transfer tax rebates — Ontario (up to $4,000) and Toronto (up to $4,475) for qualifying first-time buyers.

Stack these together and you can recover a meaningful portion of your closing costs — but you need to know about them before you buy, not after.

The Real Math: 5% Down vs. 20% Down

Let’s run the numbers on a $600,000 purchase.

Path A — 5% down ($30,000): Mortgage of $570,000 plus ~$22,800 in insurance = $592,800 financed. At a 4.5% fixed rate over 25 years, your monthly payment is roughly $3,270. You’re in the market now.

Path B — 20% down ($120,000): Mortgage of $480,000, no insurance. Same rate, same amortization — monthly payment of roughly $2,665. Lower payment, more equity, no insurance cost.

On paper, Path B looks better. But here’s the question nobody asks: how long does it take to save an extra $90,000?

If it takes you three years, and property prices rise even 3% annually during that time, the $600,000 home is now $655,000. You saved $90,000 but the price went up $55,000 — and your new 20% down payment is $131,000, not $120,000. You’re chasing a moving target.

Meanwhile, the buyer who went in at 5% three years ago has been building equity the entire time, likely at a lower interest rate because of the insurance.

That said — 20% down does make sense in some situations. If you already have the savings, if you’re buying a rental property (where insurance isn’t available), or if your carrying costs at 5% would stretch you past your comfort zone, waiting and saving more is the right call. It’s not always one or the other.

What I Tell Every First-Time Buyer

Start with the budget conversation, not the property search. Know your total cost — down payment and closing costs and the first few months of carrying costs. Get pre-approved so you’re shopping with real numbers instead of assumptions.

And don’t let the 20% myth keep you on the sidelines when 5% could get you in the door years earlier.

If you’re a first-time buyer trying to figure out the numbers, reach out. I’ll run your specific scenario — purchase price, down payment options, closing costs, monthly payments — so you know exactly where you stand before you start looking.