Understanding Down Payments in Canada

One of the first questions most homebuyers have is: “How much do I need for a down payment?” The answer depends on the type of home you’re buying, its purchase price, and your overall financial picture.

Minimum Down Payment Rules

In Canada, the minimum down payment is based on the purchase price of the property:

5% of the first $500,000
10% of the portion above $500,000
20% if the purchase price is $1,500,000 or more

For example, if you’re buying a $600,000 home:

5% of $500,000 = $25,000
10% of $100,000 = $10,000
Total minimum down payment = $35,000

[Click here to calculate your minimum down payment]

Where Down Payments Can Come From

Your down payment doesn’t have to be all savings. Common sources include:

Personal savings or investments
RRSP withdrawals through the Home Buyers’ Plan
Gifted funds from an immediate family member
Proceeds from selling another property

It’s important to have a clear paper trail for where your down payment comes from—lenders will require proof.

Why a Larger Down Payment Can Help

While the minimum is often enough to qualify, putting more down has advantages:

Lowers your monthly mortgage payment
Reduces the total interest paid over time
May help you avoid default insurance premiums (if you reach 20%)
Can improve your debt ratios and borrowing power

The Role of Default Insurance

If you’re putting down less than 20%, your mortgage must be insured through CMHC, Sagen, or Canada Guaranty. The premium is a percentage of your total mortgage amount and is added to your loan. This insurance allows you to buy with as little as 5% down.

FAQ

Can my down payment be borrowed?
Yes, some lenders allow a “borrowed down payment” if you qualify, but your debt ratios must still work with the additional payment.

Do I need 20% down for a rental property?
Yes, rental properties generally require at least 20% down, and default insurance does not apply.

Can I use my RRSP for a down payment?
Yes, through the Home Buyers’ Plan you can withdraw up to $60,000 per person (as of 2025), tax-free, if it’s repaid within the required period.

Final Thoughts

Your down payment is one of the biggest pieces of your home purchase. Whether you’re putting down the minimum or a larger amount, the key is to know your options and understand how it affects your budget, monthly payments, and long-term financial plan.

[Click here to see how your down payment affects your pre-approval]