As of September 2025, the average house price in Montreal was $578,900. This represents an increase of 6.8% compared to 2024.
This means that to make the standard 20% down payment, buyers will need to save $115,780, just to get an average house in Montreal.
This is a significant amount of money to save up, especially when you factor in closing costs like pre-purchase inspections and land transfer tax.
Buyers have several different options to save for a down payment. Each carries their own risk. In this article we answer the question Should you borrow for your down payment? More specifically, we will cover:
- Can you borrow money to make a down payment?
- What are the options to borrow money from for your down payment?
- The pros and cons of borrowing money to make a down payment (at a glance)
- The benefits of borrowing money to make a down payment on a home
- The downsides of borrowing money to make a down payment on a home
- Alternative ways to save for your down payment
- Can I borrow money for a deposit vs down payment?
- Final thoughts
Can you borrow money to make a down payment?
Yes! Thankfully, in Canada, you can borrow money to help with your down payment. However, most mainstream lenders will still expect the person buying the property to contribute at least 5% of the purchase price from verified personal funds such as savings. For example, if you’re buying a home for $600,000, you would need at least $30,000 (5%) from your own resources.
All that being said, if your lender allows you to borrow additional funds, this will likely reduce the size of the total mortgage you can qualify for. This is because the borrowed amount increases your monthly debt obligations, which increase your Total Debt Service (TDS) ratio. This is the percentage of your gross monthly income that goes toward housing costs and debt repayments. A higher TDS ratio means that a larger portion of your income is already committed to payments, leaving you with less room to qualify for a new mortgage.
How much your mortgage amount is reduced will depend on where the borrowed funds come from and how they affect your monthly repayment obligations.
For instance, borrowing from a secured source (like a Home Equity Line of Credit or HELOC) usually carries lower interest and is viewed more favourably by lenders. Meanwhile, borrowing from an unsecured source (like a personal loan or credit card) is going to raise your monthly debt payments and result in a higher TDS. This will in turn reduce the size of mortgage that you can qualify for.
Buyer Tip
What are the options to borrow money from for your down payment?
If you plan to borrow money to help fund your down payment, what is important is where the money comes from. Lenders generally classify these sources into two categories: secured and unsecured.
Secured borrowing is considered less risky because it’s backed by an asset such as your home or investment. If you cannot make the payments, the lender can take ownership over the asset and sell this to recover their debt. This security gives lenders confidence, which often means lower interest rates and better terms.
Unsecured borrowing, on the other hand, is not backed by any collateral. This is because the lender takes on more risk. These loans usually come with higher interest rates, shorter repayment periods and can have a bigger impact on your ability to qualify for a mortgage.
The table below shows you the options for secured vs unsecured options.
| Secured Borrowing Options | Unsecured Borrowing Options |
| Home Equity Line of Credit (HELOC) | Personal Line of Credit |
| Second Mortgage | Personal Loan |
| Borrowing Against Investments (e.g. RRSP loan) | Credit Card Advance |
| Margin Loan (against securities) | Borrowed Cash / Private Loan |
For a complete list of the options, read our article Your Down Payment Options When Buying a House in Canada.
The pros and cons of borrowing money to make a down payment (at a glance)
It is not always a bad idea to borrow for your down payment. In fact, under the right conditions it can save you thousands of dollars. Here are some of the pros and cons.
| Benefits of borrowing for your down payment | Downsides of borrowing for your down payment |
| Get to market quicker | Repayments can be costly |
| Stop wasting money on rent | Lower equity adds risk |
| Grow your net worth | More debt decreases affordability |
| Save on mortgage default insurance | Borrowing from family can create problems |
The benefits of borrowing money to make a down payment on a home
In this section, we take a look at the benefits of borrowing for your down payment:
- Get to market faster
- Stop wasting money on rent
- Grow your net worth
- Save on mortgage default insurance
Get to market faster
The main reason that people borrow money for a down payment is to become a homeowner faster. The reason this can make sense is because home prices in Canada have been rising much faster than wages.
For example, in Quebec, the average home price increased from $523,374 in September 2024 to $558,853 in September 2025. This represents a 6.8% jump in just one year. In contrast, average wages typically grow by only 2–3% per year. This means that if you wait, the market can outpace your ability to save.
By contrast, once you’re in the market, your home equity will grow alongside rising property values. This means that instead of chasing higher prices, you benefit from them. Each year of appreciation increases your net worth, helping you build home equity faster and move up the property ladder more easily in the future.
For this reason, borrowing for a down payment so that you can buy sooner can sometimes make financial sense. Although this needs to be considered relative to other factors such as your debt load, interest rates, job stability and how comfortably you can handle the monthly payments once the mortgage and loan are combined.
Stop wasting money on rent
Renting offers flexibility and lower upfront costs. This means that you can generally get a better location than when buying. However, rent payments do not build wealth. Once paid, they are gone for good. Meanwhile, rents continue to rise faster than wages, pushing many further from city centres. In Montreal, for example, the average rent for a two-bedroom apartment rose 7.8% between 2023 and 2024, reaching $1,143 per month (according to the CMHC).
Owning a home, on the other hand, turns housing costs into investment. Each mortgage payment builds equity, increasing your net worth over time. This assumes property values remain stable or rise. Protecting that value also means budgeting for maintenance (or paying condo fees). This money can be used to conduct essential upkeep to your property, like replacing windows or repairing roofs, which helps preserve resale potential.
Of course, paying mortgage interest does not build equity. Similar to rent, that portion is the cost of borrowing. Still, owning converts a large part of your housing expense into a long-term asset instead of an ongoing loss. Furthermore, you can limit the mortgage interest payments by choosing the shortest repayment term you can afford.
When comparing the financials of renting vs. borrowing for a down payment, the key question is time. Borrowing to buy sooner can make sense when the increase in home prices and equity you’d gain outweighs the extra cost of borrowing to finance your down payment. Ultimately the right choice depends on your ability to manage repayments comfortably and whether your local market is growing fast enough to make early entry worthwhile.
Grow your net worth
For many years, home prices in Canada were relatively flat. However, since the COVID-19 pandemic, low interest rates and rising immigration have triggered a surge in home values. In fact, in several Canadian markets, prices have risen by 50% or more over five years. This means a home worth $500,000 five years ago could now be worth $750,000 or more. Simply by holding the asset and paying your mortgage, some people made massive gains.
In many cases, this level of growth outweighs the extra cost of borrowing for a down payment. When you borrow a modest amount to enter the market sooner, the equity you gain from appreciation can more than offset the interest and fees you pay on that loan.
Save on mortgage default insurance
When you buy a home in Canada with a down payment of less than 20%, you must pay mortgage default insurance. Insurance must be purchased from one of three providers: the Canada Mortgage and Housing Corporation (CMHC), Sagen, or Canada Guaranty.
Even though you pay for this insurance, its purpose is to protect the lender in the event you default on your mortgage. The premium typically ranges from 2.8% to 4.0% of your mortgage amount. For example, if you buy a $500,000 home with a 5% down payment, your mortgage would be $475,000, and the CMHC insurance premium (4%) would add $19,000. This would bring your total mortgage to $494,000.
Since this premium is added to your mortgage, you also pay interest on it over the life of your loan. At a 5.5% rate over 25 years, that $19,000 ends up costing around $37,000 total once interest is included.
In some cases, it can therefore make more sense to borrow funds to increase your down payment past the 20% threshold, thereby avoiding the insurance entirely. This works when the cost of borrowing is lower than the effective cost of the CMHC premium (plus its interest).
For example, let’s say you can put down 19%, and you need to borrow just 1% more to avoid insurance. If your home costs $500,000:
- That extra 1% = $5,000 borrowed
- Borrowed at 7% interest, the cost over 10 years ≈ $3,500 total
- Compared to paying $14,000–$19,000 in mortgage insurance (plus interest on it)
In this case, borrowing wins, because even at 7% interest, you save well over $10,000 and start with more equity in your home.
The table below breaks down three different examples of how borrowing small amounts to cross the 20% threshold compared to paying mortgage default insurance:
| Down payment | Loan-to-value (LTV) | CMHC premium rate | Effective cost (including interest) | Borrowed top-up (1%) @ 7% for 10 years | Better to borrow or Not? |
| 19% | 81% | 2.8% | ≈ $14,000 + interest ≈ $28,000 total | ≈ $3,500 | Borrowing is better |
| 10% | 90% | 3.1% | ≈ $16,000 + interest ≈ $33,000 total | ≈ $7,000 (10% top-up) | Depends on the rate |
| 5% | 95% | 4.0% | ≈ $19,000 + interest ≈ $37,000 total | ≈ $14,000 (15% top-up) | Insurance is likely cheaper |
The downsides of borrowing money to make a down payment on a home
In this section, we take a look at the downsides of borrowing for your down payment. These include:
- Repayments can be costly
- Lower equity adds risk
- More debt decreases affordability
- Borrowing from family can create problems
Repayments can be costly
If you take out a personal loan or line of credit to fund your down payment, that borrowed amount will carry its own interest rate. This rate is often much higher than your mortgage. What this means is that you will need to make two separate payments each month: one on your mortgage, and another on the down payment loan.
Lower equity adds risk
The lower your down payment is, the higher your monthly mortgage payments are going to be. While each situation is different, this means you’ll have less money left over each month to cover other expenses, build savings, or handle unexpected costs such as repairs, higher utility bills, or changes in income.
Furthermore, if you have not built up at least 20% in equity, it means that you will not be eligible for a Home Equity Line of Credit (HELOC). This is a facility that allows you to take out a loan against your home using the equity you’ve built as collateral. This can be useful if you want to finance renovations, consolidate higher-interest debt or access funds for large expenses without having to sell your home.
More debt decreases affordability
When you apply for a mortgage, lenders calculate how much you can safely afford to borrow. To do this, they look at two key ratios: Gross Debt Service (GDS) and Total Debt Service (TDS).
- GDS measures the percentage of your income that goes toward housing costs only. This includes your mortgage payment, property taxes, heating and 50% of condo fees.
- TDS measures the percentage of your income that goes toward all debts combined. This includes your housing costs plus other obligations like car loans, student loans, credit cards or any personal loans.
Most lenders want your GDS to stay below 39% and your TDS below 44%. If these ratios are too high, your mortgage application may be declined or your maximum loan amount reduced.
When you borrow money for your down payment, the monthly repayment on that loan is added to your TDS calculation. This extra debt increases your total monthly obligations and reduces how much mortgage you can qualify for.
For example, let’s say there are two identical borrowers, both earning $6,000 per month, each looking at the same home. The only difference is that one borrows $20,000 for their down payment, while the other saves it themselves. This is what that might look like:
| Scenario | GDS (Housing Only) | Other Monthly Debts | TDS (Housing + All Debts) | Estimated Max Mortgage |
| No borrowed down payment | 36% → $2,160 | $300 | 41% | $480,000 |
| With $20,000 down payment loan ($400/month) | 36% → $2,160 | $700 | 47% (too high) | $430,000 |
Borrowing from family can create problems
In 2021, 31% of first time buyers received gifted down payments from their relatives. Gifted down payments are not loans and must be documented as such. Notwithstanding this, a lot of relatives will treat gifted down payments as an informal loan. This can create tension later on, if the relative expects the money back, but the buyer has no legal requirement to repay or agreed upon payment terms.
Alternative ways to save for your down payment
There are several other ways that you can save for a down payment without needing to borrow funds.
Take more time to save
Borrowing money for your down payment can make financial sense if the expected increase in your home’s value outpaces both the interest cost of the loan and the rent you would have otherwise paid while waiting to buy. However, this might also not be the case. If the house interest rates are high and house prices are falling, it might make more sense to wait to buy. This will give you more time to save for a larger down payment.
Buy a less expensive home
Another way you can get to your down payment faster is to consider buying a less expensive home. Certain types of property are cheaper, not just from a purchase price, but also from a maintenance perspective. For example, condos in low rise buildings can be great starter homes. They typically have lower fees than condos in high rise buildings.
Another type of home that is increasing in popularity across Canada is the stacked townhouse. These developments have been encouraged by the Government of Canada and provincial planning authorities as part of their efforts to promote medium-density housing. They provide affordable two-storey accommodation for families who want to live in central or downtown areas without the high costs of detached homes or traditional condos.
Buyer Tip
Borrow from yourself
Another way to save for a down payment is to borrow from yourself using your RRSP through the Home Buyers’ Plan (HBP). This program allows first time buyers to withdraw up to $35,000 (or $70,000 per couple) from their RRSP to buy a home, without paying tax on the withdrawal. This is as long as the money is repaid within 15 years.
This approach can help you reach your down payment goal faster because RRSP contributions are tax-deductible. The tax refund you receive each year can be added back into your savings, accelerating your progress. If your employer offers a group RRSP with matching contributions, the benefits multiply. This means that you can effectively earn free money towards your future down payment, whilst also reducing your taxable income.
The main trade-off is that you are borrowing from your retirement savings, not an outside lender. While this means you avoid interest charges, it also means that any amount you don’t repay on schedule will be added to your taxable income for that year. Used carefully, though, the HBP can be a powerful tool to turn your long-term savings into a first home sooner.
Take advantage of programs for first-time homebuyers
In addition to the RRSP Home Buyers’ Plan, there are several other programs designed to help first-time buyers get into the market sooner. These programs exist at the federal, provincial, and even municipal levels, and together they can significantly reduce the upfront costs of buying a home.
At the federal level, the two most popular programs are the First Home Savings Account (FHSA) and the First-Time Home Buyers’ Tax Credit (HBTC). The FHSA lets you save up to $8,000 per year (to a lifetime maximum of $40,000) with tax-deductible contributions and tax-free withdrawals when the money is used to buy your first home. The HBTC, on the other hand, provides a non-refundable tax credit worth up to $1,500. This can be used to help offset closing costs such as legal fees, inspections and land transfer taxes.
In addition, the provincial governments periodically offer incentives and rebates related to housing. For instance, in Quebec, there are also several provincial and municipal programs that can make homeownership more affordable for first-time buyers. For example, the Home Purchase Assistance Program offers cash subsidies or refunds on the welcome tax for eligible buyers purchasing a first home in Montreal. The amount varies depending on the type of property (new or existing) and whether you have children, but it can total up to $15,000 in financial assistance.
Use a cash back mortgage for closing costs
Another option for buyers who are short on cash at closing is to choose a cash back mortgage.
With this type of mortgage, your lender gives you a lump sum of cash (usually 1%–5% of your mortgage amount) right after your mortgage closes. This money can be used to help pay for closing costs, moving expenses, required renovations or any other upfront costs of buying a home. However, this convenience comes at a price.
Cash back mortgages almost always have higher interest rates than conventional mortgages. Often 0.75% to 1.5% higher. That means you’ll pay more interest on your entire mortgage balance over time. In addition, if you sell your home or break your mortgage early, you may have to repay the cash back amount to your lender. For these reasons, cash back mortgages can be helpful in the short term but are generally more expensive in the long run. They’re best considered as a last resort if you need quick funds to close and have no other lower-cost options available.
Can I borrow money for a deposit vs down payment?
You can certainly borrow money for a deposit. However, a deposit is not the same as a down payment.
A deposit is an amount of money that the buyer offers to the seller when they present their offer to purchase (Promise to Purchase in Quebec) has been accepted. It is designed to show good faith and help the buyer’s offer stand out in a multiple-offer scenario. The deposit will be paid into a trust account. In Quebec, this account is normally held at the listing brokerage, under the supervision of the Organisme d’autoréglementation du courtage immobilier du Québec (OACIQ). The deposit is then credited toward your down payment at closing, but the two serve very different purposes in the buying process.
In all cases, whether you borrow money for a down payment or a deposit, the lender will include that borrowed amount and its monthly repayment in your Total Debt Service (TDS) ratio. This directly affects how much you can qualify to borrow for your mortgage.
Final thoughts
From a purely financial standpoint, borrowing for a down payment can make sense when the home’s expected price growth exceeds the combined cost of borrowing, the rent you’d pay while saving and the returns you’d likely earn from other investments. However, this does not take into account lifestyle, risk tolerance or personal stability.
If you’re confident you can manage the higher monthly payments and still keep a financial cushion for unexpected costs, borrowing for a down payment may be a sensible way to buy sooner. But if taking on extra debt would stretch your budget or cause stress, it’s often wiser to wait and save gradually, or buy a smaller place as a starting point to get into the market.
Did you know that the average first-time buyer in Montreal stays in their home for only about 4.5 years? For many, that first property is just a stepping stone toward something bigger.
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