This isn’t all you’ll have to save. There is also a number of expenses and fees, collectively called closing costs. We take a look at all of the costs you can expect to have to pay and how you could still buy your first home, even if you don’t have much in the way of savings.

The Biggest Cost: The Down Payment
There are some key advantages of making at least a 20% down payment. Firstly, you’ll owe less, have lower mortgage payments and ultimately pay less in interest. Even more importantly, having a 20% down payment means you don’t have to take out mortgage insurance, which can be costly.

Here are some down payment examples:

These are considerable amounts and can be beyond the reach of many first-time homebuyers. So, if you don’t have this kind of money saved but want to buy a home now, what are your options?

The Mortgage Default Insurance Option
Any down payment between 5% and 19.99% requires mortgage default insurance from either CMHC or Sagen. If you can’t muster a 5% down payment, you can’t buy a home.

The amount of mortgage default insurance you’ll have to pay will depend on the size of your down payment and the cost of your home. Here are some examples of mortgage insurance premiums:

Thankfully, you don’t have to pay for this up front. It can be added to your mortgage loan and paid over the same amortization period (typically 25 years).

The First Home Savings Account

The First Home Savings Account (FHSA) is a tax-advantaged investment option designed for Canadian residents aged 18 years or above. This investment account is specifically targeted toward first-time home buyers who can use it to save for a down payment on their home. Learn more about the advantages here.

The Home Buyers’ Plan Option
If you have sufficient money saved up in your RRSPs, you could use that money for your down payment and avoid having to pay for mortgage insurance. Under the government’s Home Buyers’ Plan, each homebuyer can use up to $35,000 of their RRSP savings without paying a penalty.

There are some rules however, including:

• You can’t have owned a home in the previous five years.
• You have to live in the home you’re buying.
• You’ll need to pay the money back into your RRSPs within 15 years.

The Gift Option
You can use a financial gift to pay your down payment. However, the money must come from a close relative and they will have to provide the lender with a letter confirming that the money is a gift and not a loan.

Closing Costs
There are several other expenses you’ll need to pay to close the sale of your new home. Costs vary depending on the price and size of your home, but below is a range of typical expenses:

Appraisal fee – most lenders require this to determine the value of your new home. Approximate cost: $350.

Legal costs – you will need to hire a lawyer and their services typically include title insurance and title searches. Approximate cost: $700-1,000. 

Home inspection fee – not obligatory, but can save you thousands of dollars if it uncovers major structural damage. Approximate cost: $200-800.

Land title transfer fee and mortgage registration – You’ll need to pay a land transfer fee of 0.3% of the property’s value plus $160 mortgage registration. Total cost depends on purchase price: for example, $760 for a $200,000 home.

Moving costs - $500 on average.

Home insurance – you will need to have this in place before you move in. Costs can vary and are usually charged monthly.