Mortgage Down Payment Guide: How Much for a House in Canada

Your down payment is the upfront cash you pay toward a home purchase, and it directly affects your mortgage amount, interest rate, and monthly payments. In Canada, the minimum down payment ranges from 5% to 20% of the purchase price, depending on the home's value. For example, if you buy a $500,000 home, you need at least $25,000 down (5% on the first $500,000). This guide explains how much down payment you need, how it impacts your mortgage, and what every Canadian borrower should consider before signing with a lender.

Minimum Down Payment Requirements in Canada

Canadian mortgage rules are set federally, and your minimum down payment depends on the home price. As a general rule:

• Home price $500,000 or less: Minimum 5% down payment.
• Home price $500,001 to $999,999: 5% on the first $500,000, plus 10% on the portion above $500,000.
• Home price $1 million or more: Minimum 20% down payment.

If your down payment is less than 20%, you must buy mortgage default insurance (often called CMHC insurance) from a provider like Canada Mortgage and Housing Corporation, Sagen, or Canada Guaranty. This insurance protects the lender, not you, and adds a premium to your mortgage amount. The premium is typically 2.8% to 4% of the loan, depending on your down payment size.

How Your Down Payment Affects Your Mortgage

A larger down payment lowers your loan-to-value ratio, which can lead to a better interest rate from your lender. It also reduces or eliminates the need for mortgage insurance. For instance, putting 20% down avoids CMHC premiums entirely, which can save thousands of dollars over your amortization period. However, saving a 20% down payment can take years—especially in expensive markets like Vancouver or Toronto—so many buyers choose a smaller down payment and pay the insurance premium.

Your down payment also affects your monthly payment amount. A higher down payment means you borrow less, so your principal and interest payments are lower. This can free up cash for other costs like property taxes, utilities, and maintenance. Keep in mind that your credit score plays a role too: a strong score (700+) can help you qualify for a better mortgage rate, regardless of your down payment size.

Where Does Your Down Payment Come From?

Lenders in Canada want to see that your down payment comes from your own savings or a verifiable source. Common sources include:

• Personal savings: Cash saved in a bank account or Tax-Free Savings Account.
• RRSP withdrawal: First-time buyers can withdraw up to $35,000 from their RRSP tax-free under the Home Buyers' Plan, as long as they repay it within 15 years.
• Gift from a family member: A parent or relative can gift you the down payment, but you'll need a signed gift letter confirming it is not a loan.
• Sale of assets: Proceeds from selling a car, investments, or other property.

Borrowing your down payment from a lender (e.g., a personal loan or HELOC) is generally not allowed for a conventional mortgage, because lenders want to see that you have the financial discipline to save. If you're self-employed or have a consumer proposal on your credit report, you may need a larger down payment (often 20% or more) and a stronger credit score to qualify.

Down Payment and Mortgage Insurance: What to Expect

Mortgage default insurance is a key factor when your down payment is under 20%. The premium is added to your mortgage balance and paid over your amortization. Here's a quick look at typical premium rates (as a percentage of the mortgage amount):

These premiums are standard across Canada for most lenders, but they can change. A higher down payment reduces the premium percentage and total cost. For example, on a $400,000 mortgage with 5% down, the premium is roughly $15,200; with 15% down, it drops to about $9,520.

Tips for First-Time Home Buyers in Canada

If you're a first-time buyer, consider these strategies to build your down payment and improve your mortgage application:

• Set a savings goal: Use a high-interest savings account and automate monthly transfers.
• Check your credit report: Get free reports from Equifax and TransUnion Canada. Dispute errors and pay down debt to boost your score.
• Get pre-approved: A mortgage pre-approval from a lender gives you a clear budget and locks in a rate for 90–120 days.
• Factor in closing costs: Budget 1.5% to 4% of the purchase price for legal fees, land transfer tax, and home inspection.
• Consider provincial programs: Some provinces offer first-time buyer rebates or land transfer tax exemptions. Check with your provincial housing authority.

Remember, your down payment is just one piece of the puzzle. Your mortgage term, amortization length, and interest rate all shape your long-term costs. Always compare offers from multiple lenders and read the fine print before committing to a mortgage.