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If you're a first-time buyer, the down payment question is probably one of the first things you're thinking about. How much do I need? Where does it need to come from? Do I really have to have 20%?
Let's clear all of this up — because there's a lot of misinformation out there, and some of it is holding people back from buying sooner than they could.
What Is a Down Payment?
Your down payment is the portion of the home's purchase price that you pay upfront, out of pocket. The rest is covered by your mortgage. The size of your down payment determines your loan-to-value ratio — essentially, how much of the home the bank is financing versus how much is yours from day one.
The bigger your down payment, the smaller your mortgage, and the less you'll pay in interest over time. But you don't need to put down 20% to buy a home in Canada — not even close.
What Are the Minimum Down Payment Requirements in Canada?
Here's how the minimums work, broken down by purchase price:
Homes under $500,000: Minimum 5% down
Homes between $500,000 and $999,999: 5% on the first $500,000, plus 10% on the portion above $500,000
Homes $1,000,000 and over: Minimum 20% down — no exceptions
So if you're buying a $450,000 home, the minimum down payment is $22,500. That's a lot more achievable than the $90,000 that a 20% requirement would demand.
What's the Catch With Less Than 20% Down?
When your down payment is less than 20%, your mortgage is considered "high-ratio" and you're required to purchase mortgage default insurance through CMHC (Canada Mortgage and Housing Corporation). This insurance protects the lender — not you — if you default on the loan.
The premium is calculated as a percentage of your mortgage amount and added directly to your mortgage balance. Here's how it breaks down:
5–9.99% down: 4.00% premium
10–14.99% down: 3.10% premium
15–19.99% down: 2.80% premium
On a $400,000 home with 5% down, that's a premium of roughly $15,200 added to your mortgage. It increases your total borrowing cost, but it also makes homeownership accessible years earlier than waiting to save 20% would.
Whether that trade-off makes sense depends on your individual situation — and it's a conversation worth having with your mortgage broker.
Where Can Your Down Payment Come From?
Lenders want to know where your down payment money is coming from — not to be nosy, but to verify that it's legitimate and not a loan that would affect your debt ratios. Acceptable sources include:
Personal savings: The most straightforward source. Lenders typically want to see 90 days of bank statements showing the funds.
RRSP Home Buyers' Plan (HBP): First-time buyers can withdraw up to $35,000 from their RRSP (or $70,000 combined for a couple) tax-free to use toward a home purchase. You have 15 years to repay it.
First Home Savings Account (FHSA): A newer and genuinely excellent tool for first-time buyers. You can contribute up to $8,000/year to a maximum of $40,000, and withdrawals for a qualifying home purchase are completely tax-free — no repayment required.
Gift from an immediate family member: Many lenders accept gifted down payments from parents or close family. There's typically a gift letter required confirming the funds don't need to be repaid.
Proceeds from a sale or other asset: If you're selling a vehicle, investments, or other property, those proceeds can be used.
A Note on the FHSA
If you're a first-time buyer who hasn't opened a First Home Savings Account yet, this is worth paying attention to. The FHSA combines the best features of an RRSP and a TFSA — contributions are tax-deductible, and qualifying withdrawals are tax-free. It's one of the most powerful savings tools the government has introduced for first-time buyers in a long time.
Even if you're not ready to buy today, opening the account now starts your contribution room accumulating. Talk to your financial advisor or bank about getting this set up.
So, How Long Will It Take to Save?
That depends on your income, your expenses, and the price range you're targeting. But here's a framework that helps: work backward from your target down payment amount, subtract what you've already saved, and divide by what you can realistically put away each month.
If the timeline feels discouraging, consider whether the FHSA, the HBP, or a family gift could help close the gap. A lot of first-time buyers are closer to ready than they think.
Not sure if you're ready to buy or how far off you are? Let's figure it out together — no pressure, just a real conversation about where you stand. — Cassie Schellenberg, Personal Real Estate Corporation
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