Your Down Payment Options When Buying a House in Canada (2025)

For most Canadian residents, saving for a down payment is the biggest challenge in homeownership.

However, there are many ways that you can speed up this process by using different sources of funds, or through government programs like the RRSP Home Buyers’ Plan (HBP) or the First Home Savings Account (FHSA).

In this article we are going to look at what are your down payment options. More specifically, we are going to cover:

• How much down payment do you need to buy a house?
• What are traditional down payment options?
• What are non-traditional downpayment options?
• Frequently asked questions
• Final thoughts: What are the best down payment options?

How much down payment do you need to buy a house?

When buying a home in Canada, the size of your down payment depends on the property’s price. Most major lenders (like banks) follow national mortgage insurance rules that set the minimum down payment requirements for insured mortgages.

Here’s how it breaks down:

• 5% on the first $500,000 of the purchase price
• 10% on the portion between $500,000 and $999,999
• 20% for homes priced at $1 million or more (these do not qualify for mortgage insurance)

For example, if you’re purchasing a home for $750,000, the minimum down payment would be $50,000, that’s 5% of the first $500,000 and 10% of the remaining $250,000.

These are the minimum down payments that lenders will accept. However, depending on your financial situation, it may make sense to contribute more. A larger down payment can reduce your monthly mortgage payments and give you more flexibility in your budget. Additionally, putting down 20% or more allows you to avoid mortgage insurance, which typically adds 2.8% to 4% to your mortgage amount. 

Ultimately, deciding how much to put down depends on your personal finances, comfort with debt, and long-term goals. You need to decide whether that’s keeping more cash on hand for renovations, investing or simply lowering your monthly payments.

What are the traditional down payment options?

A traditional down payment method is one that comes from sources that lenders recognize and verify during mortgage approval. These include:

• Personal savings / investments
• RRSP withdrawals through the Home Buyers’ Plan (HBP)
• Non-repayable gifts from a relative
• Proceeds from the sale of another property

Now that you know the basics, let’s break each one down.

Personal savings / investments

Lenders look most favourably on buyers who have built their down payment through steady, documented savings. This shows financial discipline and consistency. These are qualities that will strengthen your mortgage application when reviewed alongside your credit history.

For example, if your monthly income is $6,000, you might allocate 50% to essentials, 30% to lifestyle, and 20% to savings. This will help you set aside around $1,200 per month toward your down payment goal. Starting from scratch, it will take you approximately 6 years to save up for 20% down on a $500,000 property.

If you are working toward a specific deadline, you can accelerate your progress by trimming non-essentials like entertainment or travel and redirecting that money into a dedicated housing fund. You can also shorten the time it takes to save by using registered savings programs such as the First Home Savings Account (FHSA) or Tax-Free Savings Account (TFSA).

RRSP withdrawals through the Home Buyers’ Plan (HBP)

The Home Buyers’ Plan (HBP) lets first-time home buyers withdraw up to $60,000 (or $120,000 per couple) from their RRSP tax-free. This is provided that the money withdrawn is used toward purchasing or building a qualifying home.

The HBP is like making a 15-year, zero percent interest loan to yourself. This is because you are effectively borrowing money from your own RRSP. You then need to repay this money gradually back to your RRSP over 15 years. Each repayment then simply restores your retirement savings rather than paying interest to someone else.

The downside is that the money you withdraw stops earning investment returns during that time. Therefore, while you avoid paying interest, you may miss out on potential growth in your RRSP. Many buyers use the HBP in conjunction with other savings tools, like a Tax-Free Savings Account (TFSA) or a First Home Savings Account (FHSA).

Non-repayable gifts from a relative

In recent years, gifted down payments have become a major source of help for first-time homebuyers with roughly 31% of Canadians receiving financial assistance from family. A non-repayable gift can make homeownership possible much sooner, but lenders apply strict conditions to ensure the funds are legitimate and not disguised loans.

In most cases, the gift must come from an immediate family member such as a parent or grandparent, and both parties must sign a gift letter confirming that the money is a genuine gift with no expectation of repayment. Lenders will also ask for proof of transfer, such as a bank statement or wire confirmation, to verify that the funds have come directly from the donor’s account. This helps ensure compliance with anti–money laundering (AML) rules and protects both the borrower and the lender.

While there’s no legal cap on the amount that can be gifted (and not income tax charged on the gift), the borrower must still qualify for the mortgage on their own income and credit profile. In other words, a gift can help bridge the financial gap required to make the down payment but, it does not replace the need to meet lending standards or show the ability to manage the mortgage responsibly.

Proceeds from the sale of another property

A common way to fund a down payment is by using the equity from a property you already own. Equity is the difference between your property’s current value and the remaining mortgage. This approach is typical when homeowners are upgrading, downsizing, or relocating.

Timing is the main challenge with this method. If you sell before buying, then you’ll need to find temporary accommodation or arrange a short-term rental until your next purchase closes. Whereas if you want to buy before selling, then you won’t have the down payment available. Therefore, to complete the new purchase you will need to explore bridge financing or another short-term funding solution.

What are non-traditional down payment options?

Non-traditional down payment options are sources of money that don’t come from your own verified savings or other traditional methods. They include:

• Borrowed money ( personal loans, lines of credit, credit card advances, or any unverified cash).
• Rent-to-own
• Lender cash-back incentives

Mainstream lenders generally cannot accept this kind of down payment. This is because federal mortgage insurance regulations require that all insured mortgages be funded from the borrower’s own resources or a verified gift from an immediate family member.

However, there are alternative and private lenders who may offer solutions for buyers with strong income, high equity, or short-term financing needs. These lenders operate outside the federal insurance framework and can sometimes accept non-traditional sources, though usually at the cost of higher interest rates and stricter terms.

Now that you have the background, let’s take a closer look at these non-traditional sources of down payments.

Borrowed money

When it comes to borrowing money for a down payment, broadly speaking, there are two types of borrowing options: secured and unsecured. Secured options are backed by an existing asset, usually property, which makes them less risky for lenders and can result in lower interest rates. Common secured options include:

• Home Equity Line of Credit (HELOC): If you already own a home, you can borrow against the equity you’ve built up. This is one of the most common ways parents help children with a down payment.
• Refinancing your current mortgage: Some homeowners choose to refinance their mortgage to access built-up equity and use the proceeds for a new property or to assist a relative.
• Second mortgage: Similar to a HELOC, this is another loan secured against your existing property,  typically with a fixed repayment term and higher interest rate than your first mortgage.

Unsecured options are not backed by collateral and therefore carry higher interest rates and more scrutiny from lenders. These include:

• Personal line of credit: Offers flexible access to funds up to a set limit. Interest is only paid on the amount used, but it still increases your debt-to-income ratio.
• Personal loan: Provides a lump sum with fixed repayments, useful for short-term borrowing but can signal higher financial strain.
• Credit card cash advance: Technically possible but highly discouraged due to extremely high interest rates and the negative impact on your credit profile.

Each of these options gives you quick access to cash, but lenders will factor the repayments into your Total Debt Service (TDS) ratio. This is a measure of how much of your gross income goes toward housing costs and other debts. Any borrowed money that requires repayment will be added to your TDS, potentially reducing the mortgage amount you can qualify for.

Rent-to-own

Rent-to-own lets you rent a home now with the option to buy it later, usually within two to five years. It’s designed for buyers who can afford monthly payments but need more time to save for a down payment.

The way it works is that monthly rent is typically charged above market value, with a portion credited toward your future purchase. For example, if normal rent is $2,000, a rent-to-own home might charge $2,500 per month. The extra $500 is then converted into rent credits. These credits are later applied toward your down payment, when you decide to buy the home. This setup allows you to lock in a home at today’s price while continuing to build your financial readiness.

The trade-off is higher rent and the risk of losing your credits if you don’t buy. Since you have locked in the price of the home, you may also risk overpaying if home prices fall. In Quebec, companies like Quebec House Partners and HOS Financial offer such programs for buyers who aren’t yet ready for a traditional mortgage.

Lender cash-back incentives

A lender cash-back incentive is a mortgage promotion where the lender gives you a cash lump sum at closing. This is usually calculated as a percentage of your total mortgage (for example, 1% to 7%). For example, if you buy a house for $400,000, with 5% down, your total mortgage would be $380,000. If your lender offers a cash-back incentive of 5%, they would pay you $19,000 at closing.

However, this money isn’t truly “free”. The lender builds the cost of the cash back into the mortgage through a higher interest rate or other terms, meaning you’ll pay more over time. For instance, if a standard 5-year fixed mortgage is 5.00%, the same loan with a 5% cash back might carry a 5.75% rate. This will cost you thousands more in interest over the term of the mortgage.

Furthermore, if you break the mortgage early, you may also have to repay part or all of the cash back to the lender. As well as this, because of the higher rate, your TDS ratio will increase. This can make it harder to qualify for a mortgage or may reduce the amount a lender is willing to approve.

While cash-back incentives can help buyers who are short on funds at closing, they can’t be used to meet minimum down payment requirements under federal mortgage insurance rules. They can, however, help cover closing costs, such as legal fees, moving expenses, or minor renovations.

Final thoughts: What are the best down payment options?

In 2023, the average down payment in Canada was $70,378, according to Mortgage Professionals Canada. This money came from a mix of sources: 

• 58% from personal savings, 
• 8% from family gifts, 
• 4% from family loans, 
• 7% from RRSP withdrawals, 
• And 2% from other means. 

While it’s possible to borrow money or use non-traditional options to cover your down payment, the best strategy ultimately depends on your personal situation. This includes your income stability, credit profile, and comfort with debt. 

What matters most isn’t just getting into a home quickly, but doing so sustainably, with enough financial room to manage your mortgage, maintenance, and life’s unexpected costs. If you’re not sure which path makes the most sense for you, speak with a mortgage broker or financial planner before committing. The right approach can mean the difference between stretching to buy a house and building a secure foundation for long-term homeownership.

Need an expert?

If you want guidance tailored to your situation, connect with a verified realtor. Our agents specialize in helping first-time buyers and seasoned property owners navigate financing options, government programs and negotiations so you can get the most for your money.