Canada Mortgage Guide 2025: CMHC, Rates & First-Time Buyers

Canadian Mortgage Market 2025

Canada's mortgage market is well-regulated with unique features like CMHC insurance and stress testing. Understanding these helps you navigate the home buying process successfully.

Current Interest Rates (CAD)

5-year Fixed: 4.5% - 5.5%
3-year Fixed: 4.8% - 5.8%
Variable Rate: 5.5% - 6.5%
1-year Fixed: 5.5% - 6.5%

CMHC Mortgage Insurance

Required when down payment is less than 20%:

5-9.99% down: 4.00% premium
10-14.99% down: 3.10% premium
15-19.99% down: 2.80% premium
20%+ down: No insurance required

CMHC Benefits:

Allows home purchase with smaller down payment
Often results in lower interest rates
Premium can be added to mortgage amount
Protects lender, enabling them to offer better terms

Mortgage Stress Test

All borrowers must qualify at the higher of:

Contracted rate + 2%
5.25% (benchmark rate)

This ensures you can afford payments if rates increase. Reduces maximum borrowing amount by approximately 20%.

First-Time Home Buyer Incentives

First-Time Home Buyer Incentive (FTHBI):

5-10% of home price as shared equity
Reduces monthly mortgage payments
Must be repaid when selling or after 25 years
Income limit: $120,000 (or $150,000 in Toronto, Vancouver, Victoria)

Home Buyers' Plan (HBP):

Withdraw up to $35,000 from RRSP tax-free
$70,000 for couples
Must repay over 15 years
No tax on withdrawal if repayment schedule followed

First-Time Home Buyers' Tax Credit:

$10,000 non-refundable tax credit
Worth up to $1,500 in tax savings
Can be split between spouses

GST/HST New Housing Rebate:

Rebate on GST/HST paid for new homes
Up to $6,300 for homes under $350,000
Partial rebate for homes $350,000-$450,000

Provincial Programs

Ontario: Land Transfer Tax Rebate up to $4,000 for first-time buyers

BC: First Time Home Buyers' Program - exemption from property transfer tax up to $500,000

Alberta: No provincial land transfer tax

Quebec: Home Buyers' Tax Credit and various municipal programs

Mortgage Types

Fixed Rate:

Rate locked for term (typically 1-10 years)
Payment certainty
Protected from rate increases
Penalties for breaking mortgage

Variable Rate:

Rate fluctuates with prime rate
Often lower than fixed rates
Payment may stay same (more goes to principal when rates drop)
Lower penalties for breaking

Hybrid/Combination:

Split mortgage between fixed and variable
Balances security and potential savings
Flexibility in managing interest rate risk

Amortization Periods

Maximum with CMHC: 25 years
Maximum without CMHC: 30 years (20%+ down payment)
Shorter amortization: Less interest paid, higher monthly payment
Longer amortization: More interest paid, lower monthly payment

Additional Costs

Home Inspection: $400-$600
Appraisal: $300-$500
Legal Fees: $1,000-$2,000
Title Insurance: $200-$400
Land Transfer Tax: 0.5-2% (varies by province)
Property Insurance: $1,000-$3,000 annually

Prepayment Options

Most Canadian mortgages allow:

10-20% lump sum payment annually
Increase regular payment by 10-20%
Double-up payments
Accelerated payment schedules (bi-weekly, weekly)

Breaking Your Mortgage

Fixed Rate Penalty: Greater of 3 months interest or Interest Rate Differential (IRD)

Variable Rate Penalty: Typically 3 months interest

IRD can be substantial - calculate carefully before breaking mortgage.

Calculate Your Canadian Mortgage

Use our calculator set to CAD to:

Calculate monthly payments including CMHC insurance
Compare fixed vs variable rate scenarios
See impact of different amortization periods
Plan prepayment strategies
Understand total interest costs

Tips for Canadian Home Buyers

Get pre-approved before house hunting
Compare rates from banks, credit unions, and mortgage brokers
Consider total cost, not just interest rate
Understand all fees and penalties
Take advantage of first-time buyer programs
Make accelerated bi-weekly payments to save on interest
Review mortgage at renewal for better rates
Maintain good credit score (680+ for best rates)