Minimum Requirements (5/10/20%)
Canadian law and lender requirements establish minimum down payments based on property value. The minimum down payment depends on the purchase price and the type of property.
Properties up to $500,000
- • Minimum 5% down on first $500,000
- • Example: $400,000 home requires $20,000 (5%) down payment
Properties $500,000-$1,000,000
- • Minimum 5% on first $500,000, 10% on the remainder
- • Example: $750,000 home requires $50,000 down ($25,000 + $25,000)
Properties over $1,000,000
- • Minimum 20% down payment required
- • Example: $1.5M home requires $300,000 (20%) down payment
- • Mortgage insurance is not available for these properties
Mortgage Insurance (CMHC & Alternatives)
If you put down less than 20%, lenders require mortgage insurance to protect against default. The Canada Mortgage and Housing Corporation (CMHC) is the largest insurer, but private insurers also provide coverage.
Insurance cost varies by down payment:
Insurance premiums are typically added to the mortgage, increasing the total borrowed amount and monthly payments. For example, a $500,000 mortgage with 5% down ($25,000 down payment) requires insurance of approximately $19,000, raising the total mortgage to $494,000 (5% down on $520,000).
Major insurers in Canada:
- •CMHC (Canada Mortgage and Housing Corporation): largest, government-backed
- •Sagen (formerly Genworth): private insurer, competitive rates
- •Canada Guaranty: private insurer, alternative pricing
Where the Money Can Come From
Down payments can be assembled from multiple sources, but lenders have rules about what they'll accept:
Personal savings (preferred)
Lenders view personal savings most favorably. Money in savings accounts, GICs, mutual funds, and investments counts directly toward down payment.
FHSA withdrawals
Withdrawals from First Home Savings Accounts are specifically designed for down payments and are fully acceptable to all lenders.
RRSP Home Buyers Plan
Withdrawals up to $35,000 from RRSPs are permitted for first-time buyers and count fully toward down payments.
Gifted down payments
Gifts from relatives (parents, grandparents, siblings) are allowed. Lenders require a signed declaration confirming the gift is not a loan and doesn't need repayment.
Borrowed funds (caution)
Loans for down payments (except HBP) create additional debt obligations that lenders count against qualification. A loan to finance the down payment increases your debt servicing ratio.
Government programs
Some provinces offer down payment grants or shared equity programs providing 5-10% of the purchase price. Check provincial housing agencies for availability.
FHSA and Home Buyers Plan Strategy
Tax-advantaged accounts provide the largest accessible down payment funds for most buyers:
FHSA maximization
First-time buyers can contribute up to $40,000 cumulative (5 years at $8,000/year). If purchasing within 5 years, FHSA is highly efficient due to tax deductions and tax-free growth.
HBP for existing RRSP balances
If you've accumulated RRSPs through employment or personal contributions, up to $35,000 can be withdrawn for down payment without tax. This is immediately available capital.
Combined approach
A buyer with 3 years of FHSA contributions ($24,000) and $40,000 in RRSP savings could access $59,000 total ($24,000 FHSA + $35,000 HBP). This is a substantial down payment for most properties.
Gifted Down Payments
Family gifts can supplement your down payment, but they must meet lender requirements:
What lenders require for gifted funds:
- •Written declaration from the gift-giver confirming it's a gift, not a loan
- •Proof that gift funds have been in your account for 2+ months
- •Documentation of the source of gift funds (withdrawal from gift-giver's account)
- •No repayment obligation (lenders won't accept "hidden loans")
Warning about hidden loans:
Some families structure "gifts" that are actually loans to be repaid. Lenders view this as fraudulent misrepresentation and may deny financing or demand immediate repayment if discovered.
Saving Strategies
Building down payment funds requires disciplined saving. Here are effective strategies:
- 1Automate savings. Set up automatic transfers from each paycheck to a dedicated down payment savings account. Pay yourself first before budgeting for other expenses.
- 2Contribute to FHSA. Prioritize $8,000/year FHSA contributions. Tax refunds from these contributions can be reinvested in the FHSA.
- 3Maximize tax refunds. Use tax refunds to boost down payment savings rather than spending on discretionary items.
- 4Separate account for down payment. Keep down payment funds in a separate savings account to prevent temptation to access them for other purposes.
- 5Reduce discretionary spending. Cut back on entertainment, dining out, and subscriptions temporarily to accelerate down payment accumulation.
- 6Use high-interest savings accounts. Keep down payment funds in HISA or GICs earning 4-5% annually, maximizing growth while maintaining accessibility.
Impact on Monthly Payments
The down payment significantly affects monthly mortgage payments through both principal and insurance costs:
Example: $500,000 home, 5-year mortgage at 5%
5% down ($25,000): Mortgage $495,000 + insurance, monthly ~$2,775 + property tax + insurance
10% down ($50,000): Mortgage $468,500 + insurance, monthly ~$2,610 + property tax + insurance
20% down ($100,000): Mortgage $400,000, no insurance, monthly ~$2,240 + property tax + insurance
The 20% down payment saves approximately $500-600/month compared to 5% down, excluding insurance costs avoided.
Provincial Down Payment Programs
Several provinces offer grants or assistance programs for down payment:
- •Ontario: First-time buyer land transfer tax exemption (up to $500K); some municipalities offer grants
- •BC: First-time buyer property transfer tax exemption; down payment assistance in some regions
- •Alberta: Municipal grants in Calgary and Edmonton; no provincial land transfer tax
- •Quebec: Deduction for first-time buyer mortgage interest; program varies by income