Get a mortgage in Canada step by step: check your credit and budget, get pre-approved, pass the stress test, work out your down payment and mortgage loan insurance, choose your term and amortization, and sign the contract.
Applies in: CA
A mortgage is a loan from a lender to help pay for a home, secured on the property itself. Getting one in Canada is a sequence: check your credit and budget, get pre-approved, pass the stress test, work out your down payment and whether you need mortgage loan insurance, choose your term, rate type, and amortization, then apply and sign. This guide walks that sequence in order. It is process information only, not financial advice: it does not tell you which lender, rate, or term to pick, and it does not cover refinancing or getting a lower rate on a mortgage you already have — those have their own guides linked below. Every figure comes from the Financial Consumer Agency of Canada (FCAC) and Canada Mortgage and Housing Corporation (CMHC) pages cited inline.
A potential lender will look at your credit report before approving you for a mortgage, according to Financial Consumer Agency of Canada, Preparing to get a mortgage. Before you start shopping around for a mortgage, order a copy of your credit report and make sure it does not contain any errors, on the same page. If you do not have a good credit score, the mortgage lender may refuse to approve your mortgage or require that someone co-sign with you on the mortgage, on the same page.
Fix errors before you apply, not during: a dispute takes time, and a lender that finds an error mid-application may pause or refuse the file. This guide does not state a minimum credit score, because no minimum score was verified on an opened FCAC or CMHC page for this guide — each lender sets its own lending guidelines and policies, and a lender may refuse to grant you a mortgage if you have a poor credit history, according to Financial Consumer Agency of Canada, Getting preapproved for a mortgage.
You need to prove to your lender that you can afford to repay the requested amount. This is an eligibility criterion, according to Financial Consumer Agency of Canada, Preparing to get a mortgage. Mortgage lenders and mortgage brokers use your financial information to calculate your monthly housing costs and your total debt load, on the same page. They consider your income (before taxes), your expenses (including utilities and living costs), the amount you are borrowing, your debts, your credit report and score, and the amortization period, on the same page.
Two ratios decide most of it:
Run your own numbers against those two ratios before you start house hunting. If your housing costs alone would eat more than 39% of your gross income, you are shopping above what lenders will approve — look at properties in a lower price range so that you do not stretch your budget to its limit, according to Financial Consumer Agency of Canada, Getting preapproved for a mortgage.
When you are shopping for a mortgage, you can compare options offered by different lenders. Mortgage lenders have a process which may allow you to know the maximum amount of a mortgage you could qualify for, estimate your mortgage payments, and lock in an interest rate for 60 to 130 days, depending on the lender, according to Financial Consumer Agency of Canada, Getting preapproved for a mortgage. The process may also be called mortgage prequalification or mortgage preauthorization, and different lenders have different definitions and criteria for each step they offer, on the same page.
You can get a mortgage preapproval from mortgage lenders and mortgage brokers, on the same page. Mortgages are available from banks, caisses populaires, credit unions, mortgage companies, insurance companies, trust companies, and loan companies, on the same page. Mortgage brokers do not lend money directly to you — they arrange transactions by finding a lender for you, and since brokers have access to many lenders, they may offer a wider range of mortgage products, on the same page. Mortgage brokers generally do not charge fees for their services; instead, they usually receive a commission from the lender when they arrange a transaction, on the same page. The provinces and territories regulate mortgage brokers, and you can contact your provincial or territorial regulator to confirm that a broker is licensed, on the same page.
Before preapproving you, a lender or mortgage broker will look at your assets (what you own), your income, and your level of debt, on the same page. You will need to provide identification, proof of employment, proof you can pay for the down payment and closing costs, information about your other assets, and information about your debts or financial obligations, on the same page. For proof of employment, you may have to provide a recent pay stub, your position and length of time with the employer, and notices of assessment from the Canada Revenue Agency for the past 2 years, if you are self-employed, on the same page. Your lender or mortgage broker may ask you to provide recent financial statements from bank accounts or investments to confirm you have the down payment, on the same page.
Two warnings from the FCAC. First, this process does not guarantee your approval for a mortgage, on the same page — the preapproval amount is the maximum you may get, and the approved mortgage amount will depend on the value of the property and the amount of your down payment, on the same page. Second, a lender could refuse you for a mortgage even if you have been preapproved: before a lender approves your loan, it will verify that the property you want meets certain standards, and each lender sets its own lending guidelines and policies, on the same page. When getting preapproved, ask your broker or lender how long they guarantee the preapproved rate, if you will automatically get the lowest rate if interest rates go down while you are preapproved, and if the pre-approval can be extended, on the same page. Remember that you also need money for closing costs, moving costs, and ongoing maintenance costs, on the same page.
Federally regulated entities, like banks, require that you pass a stress test to get a mortgage. Lenders that are not federally regulated may also ask you to pass a stress test, according to Financial Consumer Agency of Canada, Preparing to get a mortgage. This means that you need to prove you can afford payments at a qualifying interest rate, which is typically higher than the actual rate in your mortgage contract, on the same page.
Banks must use the higher interest rate of either 5.25% or the interest rate you negotiate with your lender plus 2%, and that is the case for insured and uninsured mortgages, on the same page. Worked through: if you negotiate a 4% contract rate, the lender qualifies you at 6% (4% plus 2%); if you negotiate a 3% contract rate, the lender qualifies you at 5.25%, because 5.25% is higher than 5%. The stress test therefore caps how much you can borrow well below what your contract rate alone would allow — that is the point. If you already have a mortgage, you will need to pass this stress test if you refinance your home or take out a home equity line of credit, on the same page.
Use the FCAC Mortgage Qualifier Tool to see if you can qualify for a mortgage before you apply, on the same page. If the tool says you do not qualify at the price you want, the levers are a bigger down payment, a cheaper home, paying down other debts to lower your TDS ratio, or a longer amortization — subject to the maximums in section 6.
A down payment is the amount of money you put towards the purchase of a home. Your lender deducts the down payment from the purchase price of your home, and your mortgage covers the rest of the price of the home, according to Financial Consumer Agency of Canada, How much you need for a down payment. The minimum amount you need for your down payment depends on the purchase price of the home, on the same page.
The minimums, verified on the FCAC page:
Normally, the minimum down payment must come from your own funds, according to Financial Consumer Agency of Canada, How much you need for a down payment. CMHC notes that down payments can come from sources such as savings, the sale of a property, or a non-repayable financial gift from a relative, and that non-traditional sources such as unsecured personal loans or lines of credit are available only for 90.01% to 95% loan-to-value for borrowers with a strong history of managing credit, according to Canada Mortgage and Housing Corporation, CMHC Second Home. If you are self-employed or have a poor credit history, your lender may require a larger down payment, according to Financial Consumer Agency of Canada, How much you need for a down payment.
Mortgage loan insurance. If your down payment is less than 20% of the price of your home, you will typically need to buy mortgage loan insurance, on the same page. Mortgage loan insurance protects the mortgage lender in case you cannot make your mortgage payments. It does not protect you. Mortgage loan insurance is also sometimes called mortgage default insurance, on the same page. Your lender may require that you get mortgage loan insurance even if you have a 20% down payment — that is usually the case if you are self-employed or have a poor credit history, on the same page. Your lender coordinates getting mortgage loan insurance on your behalf if you need it, on the same page.
The premium is a one-time charge. Mortgage loan insurance premiums range from 0.6% to 4.5% of the amount of your mortgage, and your premium depends on the amount of your down payment — the bigger your down payment, the less you pay in mortgage loan insurance premiums, on the same page. You may pay your premium by adding it to your mortgage or with a lump sum up front; if you add your premium to your mortgage, you pay interest on your premium at the same rate as your mortgage, on the same page. CMHC's premium schedule runs from 0.60% for loans up to 65% loan-to-value to 4.00% for 90.01% to 95% loan-to-value, and 4.50% for 90.01% to 95% with a non-traditional down payment, according to Canada Mortgage and Housing Corporation, CMHC Second Home. One tax to budget for: Ontario, Manitoba and Quebec apply provincial sales tax to mortgage loan insurance premiums. Your lender cannot add the provincial tax on premiums to your mortgage. You must pay this tax when you get your mortgage, according to Financial Consumer Agency of Canada, How much you need for a down payment.
A mortgage is a legal contract between you and your lender. It specifies the conditions of your loan and secures it on a property, like a house or a condo, according to Financial Consumer Agency of Canada, Choosing a mortgage that is right for you. Three choices define the contract, and you should understand each before you sign.
Term. The mortgage term is the length of time your mortgage contract is in effect. Terms may range from just a few months to 5 years or longer, on the same page. At the end of each term, you must renew your mortgage if you cannot pay the remaining balance, and you will most likely require multiple terms to repay your mortgage, on the same page. Every time you renew your mortgage term, you renegotiate your mortgage interest rate, so your payments may be higher or lower in the future, on the same page.
Interest rate type. A fixed interest rate stays the same for the entire term and is usually higher than a variable interest rate for a similar term; with a fixed rate, your payments stay the same for the entire term, on the same page. A variable interest rate may increase and decrease during the term and is typically lower than a fixed interest rate for a similar term; with a variable rate, you may keep your payments the same for the duration of your term (a fixed payment with a variable interest rate) or opt for an adjustable payment that changes if the rate changes, on the same page. A hybrid or combination mortgage offers fixed and variable interest rates on different portions of the mortgage, on the same page. When you apply for a mortgage, your lender offers you an interest rate, and you may be able to negotiate a lower rate; before you commit to a lender, shop around to get the best rate, on the same page. This guide does not compare fixed and variable rates in depth — that comparison is in the related guide linked below.
Amortization. The amortization period is the length of time it takes to pay off your mortgage. With a longer amortization period, you spread your payments over a longer period, so your payments are typically lower — but the longer you take to pay off your mortgage, the more interest you pay, on the same page. If your down payment is less than 20% of your home's price, your maximum amortization period is 30 years if you are a first-time buyer and/or purchasing a new build, and 25 years in all other cases, on the same page. If your down payment is more than 20% of your home's price, your lender sets your maximum amortization period, on the same page.
Also confirm the payment frequency and the open-versus-closed question before signing. You may choose monthly, semi-monthly, biweekly, weekly, accelerated biweekly, or accelerated weekly payments; accelerated payments allow you to make the equivalent of one extra monthly payment each year, on the same page. Open mortgages typically have higher interest rates than closed mortgages with similar terms but allow more flexibility for extra payments; closed mortgages typically have lower interest rates, and there is usually a limit on the amount of extra money you may put toward your mortgage each year, on the same page. Mortgage lenders charge a penalty fee when you break your contract — if you sell your home, you could owe the lender thousands of dollars in penalty fees, on the same page.
Once you have a property in mind and a pre-approval in hand, the lender runs the formal application: it verifies your documents and your employment, runs the credit check, has the property appraised and checked against its standards, and confirms the down payment and the mortgage loan insurance. Remember that you also need money for closing costs, moving costs, and ongoing maintenance costs, on top of the down payment, according to Financial Consumer Agency of Canada, Getting preapproved for a mortgage. This guide does not state a closing-cost figure, because no closing-cost amount or percentage was verified on an opened FCAC or CMHC page — get the itemized figure from your lender and your lawyer before closing day.
Before you sign, read the contract for the items in section 6 — term, rate type, amortization, payment frequency, open or closed, prepayment privileges, portability, and the penalty for breaking the contract. Federally regulated banks must offer and sell you products and services that are appropriate for you, and must tell you if they have assessed that a product or service is not appropriate for you, according to Financial Consumer Agency of Canada, Choosing a mortgage that is right for you. Take the time to describe your financial situation to make sure you get the right product, and do not hesitate to ask questions and make sure you understand the mortgage you have or want, on the same page. If you switch lenders after signing your mortgage contract, you may have to pay a prepayment penalty, according to Financial Consumer Agency of Canada, Getting preapproved for a mortgage — so treat the signature as the commitment it is, not as another pre-approval step.
First Home Purchase Roadmap, First Home Purchase Closing Checklist, How Variable vs Fixed Mortgages Actually Work in Canada, How to Start Getting a Lower Rate on Your Mortgage in Canada, and How to Start Building Credit in Canada.
Federally regulated entities, like banks, require that you pass a stress test to get a mortgage, and lenders that are not federally regulated may also ask you to pass a stress test, according to [Financial Consumer Agency of Canada, Preparing to get a mortgage](https://www.canada.ca/en/financial-consumer-agency/services/mortgages/preparing-mortgage.html). You need to prove you can afford payments at a qualifying interest rate, which is typically higher than the actual rate in your mortgage contract, on the same page. Banks must use the higher interest rate of either 5.25% or the interest rate you negotiate with your lender plus 2%, and that is the case for insured and uninsured mortgages, on the same page. You will also need to pass the stress test if you already have a mortgage and you refinance your home or take out a home equity line of credit, on the same page. Use the FCAC Mortgage Qualifier Tool to see if you can qualify before you apply.
The minimum amount you need for your down payment depends on the purchase price of the home, according to [Financial Consumer Agency of Canada, How much you need for a down payment](https://www.canada.ca/en/financial-consumer-agency/services/mortgages/down-payment.html). If the purchase price of your home is $500,000 or less, you need a minimum down payment of 5% of the purchase price — for a $400,000 home, that is $20,000, on the same page. If the purchase price is more than $500,000, you add two amounts: 5% of the first $500,000 plus 10% of the remaining balance — for a $600,000 home, $25,000 plus $10,000, for a total of $35,000, on the same page. Normally, the minimum down payment must come from your own funds, on the same page. If you are self-employed or have a poor credit history, your lender may require a larger down payment, on the same page.
If your down payment is less than 20% of the price of your home, you will typically need to buy mortgage loan insurance, according to [Financial Consumer Agency of Canada, How much you need for a down payment](https://www.canada.ca/en/financial-consumer-agency/services/mortgages/down-payment.html). Mortgage loan insurance protects the mortgage lender in case you cannot make your mortgage payments — it does not protect you, on the same page. Your lender may require it even if you have a 20% down payment, usually if you are self-employed or have a poor credit history, on the same page. Mortgage loan insurance premiums range from 0.6% to 4.5% of the amount of your mortgage, and the bigger your down payment, the less you pay in premiums, on the same page. You may pay your premium by adding it to your mortgage or with a lump sum up front — if you add it to your mortgage, you pay interest on your premium at the same rate as your mortgage, on the same page. Note that Ontario, Manitoba and Quebec apply provincial sales tax to mortgage loan insurance premiums, and your lender cannot add that tax to your mortgage — you must pay it when you get your mortgage, on the same page.
If your down payment is less than 20% of your home's price, your maximum amortization period is 30 years if you are a first-time buyer and/or purchasing a new build, and 25 years in all other cases, according to [Financial Consumer Agency of Canada, Choosing a mortgage that is right for you](https://www.canada.ca/en/financial-consumer-agency/services/mortgages/choose-mortgage.html). If your down payment is more than 20% of your home's price, your lender sets your maximum amortization period, on the same page. The amortization period is the length of time it takes to pay off your mortgage: with a longer amortization period your payments are typically lower, but the longer you take to pay off your mortgage, the more interest you pay, on the same page. The mortgage term is different from amortization — the term is the length of time your mortgage contract is in effect, terms may range from just a few months to 5 years or longer, and at the end of each term you must renew your mortgage if you cannot pay the remaining balance, on the same page.
No, it does not guarantee approval. Mortgage lenders have a process which may allow you to know the maximum amount of a mortgage you could qualify for, estimate your mortgage payments, and lock in an interest rate for 60 to 130 days, depending on the lender, according to [Financial Consumer Agency of Canada, Getting preapproved for a mortgage](https://www.canada.ca/en/financial-consumer-agency/services/mortgages/preapproval-qualify-mortgage.htm). During this process, the lender looks at your finances to find out the maximum amount they may lend you and at what interest rate, asks for your personal information and various documents, and likely runs a credit check, on the same page. This process does not guarantee your approval for a mortgage, on the same page. The preapproval amount is the maximum you may get — the approved mortgage amount will depend on the value of the property and the amount of your down payment, on the same page. A lender could still refuse you even if you have been preapproved, for example if the property does not meet its standards or your credit history is poor, on the same page.
Before preapproving you, a lender or mortgage broker will look at your assets, your income, and your level of debt, according to [Financial Consumer Agency of Canada, Getting preapproved for a mortgage](https://www.canada.ca/en/financial-consumer-agency/services/mortgages/preapproval-qualify-mortgage.htm). You will need to provide identification, proof of employment, proof you can pay for the down payment and closing costs, information about your other assets such as a car, cottage or boat, and information about your debts or financial obligations, on the same page. For proof of employment, you may have to provide a proof of your current salary or hourly pay rate (for example, a recent pay stub), your position and length of time with the employer, and notices of assessment from the Canada Revenue Agency for the past 2 years, if you are self-employed, on the same page. Your lender or mortgage broker may also ask for recent financial statements from bank accounts or investments to confirm you have the down payment, on the same page.