Owning a house gives you a place that’s truly yours.
One where the rent does not increase, you can create lasting memories and where every payment works like savings.
However, before you can buy a home, you need to understand what a down payment is, what the minimum requirements are, and how they actually work because if you don’t, you can easily walk into a financial nightmare without realizing it.
In this article we will cover everything that you need to know about down payments this includes:
- What is a down payment?
- What is the minimum down payment in Canada?
- Is the down payment the same as a deposit?
- How is the down payment calculated?
- What is mortgage loan insurance?
- Can I buy a home with no down payment?
- Is it better to make a large or small down payment?
- How to save for a down payment?
- A list of home purchase assistance program
First up then, what actually is a down payment and what is the minimum down payment in Canada?
What is a down payment?
A down payment is the amount of money you pay upfront when buying a home. It represents your ownership stake in the property, while the rest of the price is covered by your mortgage loan from a bank or lender.
For example, if you buy a $400,000 home and make a 5% down payment, you pay $20,000 in cash at closing, and your mortgage covers the remaining $380,000.
What is the minimum down payment in Canada?
In Canada, the minimum down payment you need depends on two main factors:
- The purchase price of the home, and
- The type of lender you’re borrowing from.
For most buyers using a mainstream (federally regulated) lender, the minimum down payment is set by federal mortgage insurance rules. These state that the minimum down payments are dependent on the purchase price of your home. These require a down payment of:
- 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
Note: These rates are set out in Section 5 of the Insurable Housing Loan Regulations (SOR/2016-142).
The reason that the Government of Canada sets a regulatory minimum is to protect both borrowers and lenders from excessive financial risk. However, alternative or private lenders who aren’t bound by federal insurance regulations may have their own criteria. They can sometimes approve low- or zero-down loans, but these usually come with higher interest rates, shorter terms, and greater risk. Examples of private lenders include, Victoria Financial, Castleton Hypothèques or Guardian Financing.
Buyers Tip
Is the down payment the same as the deposit?
The down payment and the deposit are not the same thing, although both involve paying money toward your home purchase.
The deposit is a good faith payment you make when your Promise to Purchase is accepted. It shows the seller that you’re serious and can help your offer stand out in a multiple offer scenario. The deposit is usually held in trust by the notary until the transaction closes. The deposit amount varies by transaction, but buyers typically provide around $10,000 as a show of good faith.
The down payment, on the other hand, is the total amount of your own money that goes toward the purchase price of the home. It’s paid at closing and combined with your mortgage to complete the full amount owed.
In most cases, your deposit becomes part of your down payment once the sale is finalized. For example, if you plan to make a $40,000 down payment and you’ve already paid a $10,000 deposit, you’ll only need to provide the remaining $30,000 at closing.
How is a down payment calculated?
Your down payment is a percentage of the home’s purchase price, but it’s not a flat percentage across the whole amount. In fact, the down payment is calculated on a marginal basis, meaning different parts of the price are treated differently (a bit like income tax brackets).
Here’s how it works in Canada:
- You pay 5% on the first $500,000 of the purchase price.
- You pay 10% on any amount above $500,000, up to $999,999.
- For homes priced at $1 million or more, you need 20% down on the entire price.
So, the formula changes depending on the value of the property. For example, if your home costs $600,000:
- 5% of the first $500,000 = $25,000
- 10% of the remaining $100,000 = $10,000
- Total down payment = $35,000
In short, your down payment increases step by step as your home price moves into higher brackets. The table below shows how the minimum down payment is calculated across common Canadian property prices.
Minimum Down Payment by Home Price (Canada)
| Home Price | Down Payment Calculation | Total Down Payment |
| $400,000 | 5% of $400,000 | $20,000 |
| $600,000 | 5% of first $500,000 = $25,000 + 10% of remaining $100,000 = $10,000 | $35,000 |
| $800,000 | 5% of first $500,000 = $25,000 + 10% of remaining $300,000 = $30,000 | $55,000 |
| $1,000,000 | 20% of $1,000,000 | $200,000 |
| $1,200,000 | 20% of $1,200,000 | $240,000 |
Buyers Tip
What is mortgage loan insurance?
Mortgage loan insurance protects the lender, not the buyer. The way it works is, if you cannot make your mortgage payments, the insurance provider will reimburse the lender for any losses.
For example, let’s say you can no longer make your monthly mortgage payments. In this case, the bank will contact you to discuss the missed payments and try to work out a repayment plan or temporary payment deferral. If you explain your situation and the bank agrees, you’ll enter into a repayment arrangement that allows you to catch up over time.
If you fail to meet this agreement, the bank will begin the legal process of foreclosure (or power of sale, depending on your province). The property will then be taken over by the lender and sold to recover the money owed. If the sale price doesn’t cover the full amount of your mortgage balance, the mortgage insurance company (CMHC, Sagen, or Canada Guaranty) will reimburse the bank for the loss.
Buyers Note
The insurance protects the lender, but the buyer pays the cost, which is added to the mortgage and repaid gradually through monthly instalments. The insurance is arranged by your lender, not by you, and is provided by one of three federally approved insurers: CMHC, Sagen, or Canada Guaranty.
Can I buy a home with no down payment?
In Canada, most buyers cannot buy a home with no down payment. For mainstream lenders (i.e. your traditional banks), federal mortgage rules require a minimum down payment of 5% for homes up to $500,000, and larger amounts for more expensive properties. Some private lenders may offer a mortgage with no down payment, but this will be in exceptional cases.
That said, some buyers effectively simulate a zero-down mortgage by borrowing their down payment. This can happen, for example, if the money comes from a line of credit, personal loan or a gift from a family member. In these cases, the bank still treats the down payment as valid, but you will need to show that you can handle the extra debt when they assess your ability to afford the mortgage.
A few special programs provide down payment assistance for specific groups such as first-time buyers, newcomers or members of certain First Nations. However, true 0% down mortgages are not available through major Canadian banks.
Is it better to put a large or a small down payment?
Whether it’s better to make a large or small down payment depends on your financial situation and how you manage money.
A larger down payment reduces your monthly mortgage payments and the total interest that you will pay over time. However, it also means you will have less cash available for emergencies such as unexpected repairs, job loss or problems discovered after closing which could force you to take on new debt. For people who tend to spend what they earn and struggle to save, putting down more upfront can act as a kind of forced savings, helping ensure long-term stability.
A smaller down payment, on the other hand, keeps more cash in your pocket. This can give you flexibility and a financial cushion in case of surprises. The flip side to this is that it also means higher monthly payments and possibly mortgage loan insurance costs if your down payment is under 20%.
In short, the right choice depends on your spending habits, savings discipline, and the mortgage rate your lender offers.
Buyers Tip
How to save for a down payment?
Most people start saving for a home by putting money into a regular savings account — which is fine, but not always the smartest way to reach your goal. Before you decide how to save for a down payment, it helps to understand the main choices available to you.
There are three key factors that determine the best strategy for your situation:
- Where to save: Choosing the right account type
- When you plan to buy: Defining your time horizon
- How much risk you are comfortable taking
Let’s take a closer look at each of these options.
1. Where to save: Choosing the right account type
Before you do anything else, you must choose where your money will be held.
You can use a regular savings account, but there are also registered accounts designed to help first-time buyers save faster and reduce taxes. These include the First Home Savings Account (FHSA), Home Buyers’ Plan (HBP) through your RRSP, or a Tax-Free Savings Account (TFSA). Each has their own pros and cons and different rules for contributions, withdrawals and tax benefits.
2. When you plan to buy: Defining your time horizon
Your investment choices depend heavily on how soon you will need the money. This is because the shorter your timeline, the less time you have to recover from market fluctuations and the more important it becomes to protect your savings.
In real estate, most people talk about saving for a down payment in three time horizons:
- 1-2 years
- 3 – 5 years
- 5+ years
If you plan to buy in 1–2 years, then safety matters most. In this case, you should keep your money in low-risk places like a high-interest savings account or GIC (Guaranteed Investment Certificate) which is a fixed-term deposit offered by banks that pays a guaranteed interest rate. This means that your money cannot lose value, but it’s locked in for a set period (for example, 6 months or 1 year).
Alternatively, if you plan to buy in 3–5 years, you can take moderate risk with balanced ETFs or mutual funds. These are investment funds that spread your money across both stocks and bonds, helping you earn better returns without taking on too much risk. You can buy them through your bank, investment app or financial advisor. If you do this, you should expect some short-term ups and downs, but over several years, your money will generally grow faster than in a savings account.
If you are 5+ years away, you can consider growth investments like index funds, which track the stock market and typically offer higher long-term returns. These are among the higher-risk investment options (aside from picking individual stocks, crypto, options, penny stocks etc.) and can fluctuate significantly in the short term.
Buyers Tip
You can find a qualified advisor at most major banks, credit unions, or through the FP Canada directory at www.fpcanada.ca.
3. How much risk you are comfortable taking
Every investment carries some level of risk, even the “safe” ones. Ask yourself, would I lose sleep if my savings dropped 10% next month? If the answer is yes, focus on secure, fixed-return options. If you can tolerate short-term swings for higher potential returns, you might lean toward low-fee ETFs or mutual funds.
Home purchase assistance programs
Saving up for a down payment is incredibly challenging especially since house prices are rising faster than most people’s incomes. This means that for many first-time buyers, even saving a modest down payment for a house can take years of disciplined effort.
To help with this challenge, the Government of Canada offers several programs designed to make saving for your first home easier. These are known as home purchase assistance programs. These programs can help you save faster, pay less tax and take advantage of long-term financial incentives as you work toward buying your first property.
The three main programs to know about are:
- The Home Buyers’ Plan (HBP)
- The First Home Savings Account (FHSA)
- Gifted Funds from Family (not an official program)
1. Home Buyers’ Plan (HBP)
The Home Buyers’ Plan allows first-time buyers to withdraw up to $60,000 from their Registered Retirement Savings Plan (RRSP) to buy or build a qualifying home.
This is valuable because RRSP contributions are tax-deductible, meaning you can reduce your taxable income while saving for your down payment. You can then withdraw those funds tax-free under the HBP to buy your home. Moreover, if two first-time buyers purchase together, each person can withdraw this amount which potentially gives you up to $120,000 in tax free income towards your down payment.
The key thing to remember is that whilst you do not need to pay tax on the money you withdraw from your RRSP under the HBP immediately, you must repay the tax on this money over the next 15 years, or the unpaid portion will be taxed as income.
2. First Home Savings Account (FHSA)
The First Home Savings Account (FHSA) is a newer program that was introduced in 2023.
Any payments made into the FHSA are tax-deductible, meaning that you will pay no tax on the money that you pay into your FHSA. In addition, any growth or withdrawals used to buy your first home are completely tax-free. The downside is that you can only contribute up to $8,000 per year, with a lifetime limit of $40,000.
All that being said, the FHSA is vastly superior to the HBP for several reasons and it is highly recommended that anyone saving for a down payment on their first house use this account. You can open this account through you bank.
For a full breakdown of how the FHSA works, along with the pros and cons of the FHSA, you can read our detailed guide, First Time Home Buyers: The Pros and Cons of the FHSA.
3. Gifted funds
While not an official government program, gifted down payments are another common form of home purchase assistance. Many first-time buyers receive part or all of their down payment as a gift from family members, often parents or grandparents.
Lenders allow this as long as the money is documented with a gift letter confirming that it does not need to be repaid. This letter is important because it shows the money is a genuine gift, not a loan, which means it won’t be treated as debt when assessing your mortgage eligibility. A gift letter also helps confirm that the funds are legitimate and not taxable income, since the Canada Revenue Agency (CRA) does not tax genuine gifts between family members.
In short, the gift letter protects both you and your lender proving that the funds are legitimate, non-repayable, and non-taxable, so they can safely be counted toward your down payment.
Buyers Tip
Conclusion: How much is a down payment for a house?
In Canada, the size of your down payment depends on three main factors: the price of the home you want to buy, the type of lender you choose and your personal financial situation.
For most buyers, the minimum is 5% of the purchase price for homes under $500,000, scaling up to 10% or 20% for more expensive properties. However, how much you should put down depends on your goals.
A larger down payment reduces your monthly payments and total interest, while a smaller one helps you keep more savings on hand for emergencies or renovations.
Ultimately, the best approach is to plan early, use the available home purchase assistance programs (like the FHSA or HBP), and speak with a financial advisor or mortgage broker who can help you find the right balance between affordability, flexibility, and long-term financial security.
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