This post is for educational purposes only. PlanSmartFi is not a financial advisor. Mortgage rules, program details, and eligibility conditions are subject to change. Always verify current requirements with a licensed mortgage professional or at canada.ca before making any financial decisions.
How Much Do You Need for a Down Payment in Canada?
The down payment is one of the biggest barriers to homeownership in Canada, and one of the most misunderstood. Many first-time buyers assume they need 20% saved before they can even start the process. That is not always the case. But putting down less than 20% comes with its own costs worth understanding before you commit.
This post covers the minimum down payment rules in Canada, what mortgage default insurance means for your costs, and the programs available to help you save and buy.
Minimum Down Payment Rules in Canada
The federal government sets minimum down payment requirements based on the purchase price of the home. As of December 2024, the rules are:
| Home purchase price | Minimum down payment required |
|---|---|
| $500,000 or less | 5% of the purchase price |
| $500,001 to $1,499,999 | 5% on the first $500,000 + 10% on the remainder |
| $1,500,000 or more | 20% of the full purchase price |
Example: buying a $700,000 home
5% of first $500,000 = $25,000
10% of remaining $200,000 = $20,000
Minimum down payment: $45,000
These rules apply to insured mortgages. The maximum purchase price eligible for an insured mortgage is $1,499,999. Homes at $1.5 million or above require a minimum 20% down payment with no mortgage insurance available. Rules are subject to change, so always verify current requirements at canada.ca.
What Is CMHC Mortgage Default Insurance?
If your down payment is less than 20% of the home’s purchase price, you are required to purchase mortgage default insurance. In Canada, this is commonly called CMHC insurance, after the Canada Mortgage and Housing Corporation, though two private insurers (Sagen and Canada Guaranty) offer the same product.
It is important to understand what this insurance actually does: it protects the lender, not you. If you stop making payments, the insurer covers the lender’s losses. In exchange, lenders are willing to accept a smaller down payment from buyers.
The premium is calculated as a percentage of your mortgage amount and depends on the size of your down payment:
| Down payment | Insurance premium rate |
|---|---|
| 5% to 9.99% | 4.00% of the mortgage amount |
| 10% to 14.99% | 3.10% of the mortgage amount |
| 15% to 19.99% | 2.80% of the mortgage amount |
| 20% or more | No insurance required |
| Important note | The premium is added to your mortgage principal, meaning you pay interest on the insurance cost over the life of the loan |
Example: $400,000 home, 5% down payment
Down payment: $20,000
Mortgage amount: $380,000
Insurance premium (4%): $15,200
Total mortgage including premium: $395,200
Note: Ontario, Manitoba, and Quebec also charge provincial sales tax on the premium, payable at closing and not addable to the mortgage
The larger your down payment, the lower the premium rate and the less you pay overall. Full details at CMHC.
20% Down: Is It Worth It?
Putting down 20% or more eliminates the mortgage default insurance premium entirely and reduces your overall mortgage size. It also gives you more equity in the home from day one and results in lower monthly payments.
The trade-off is time. In expensive markets like Toronto or Vancouver, saving 20% on a $900,000 home means accumulating $180,000, which can take many years. For buyers who are financially ready otherwise, getting into the market with a smaller down payment and paying the insurance premium may make more sense than waiting years to reach 20%. There is no universally right answer and it depends heavily on individual circumstances.
Programs That Can Help You Save and Buy
First Home Savings Account (FHSA)
The FHSA is a registered account that combines the tax advantages of an RRSP and a TFSA specifically for first-time home buyers. Contributions are tax-deductible and withdrawals for a qualifying home purchase are tax-free.
- Annual contribution limit: $8,000
- Lifetime contribution limit: $40,000
- Unused room carries forward one year
- Account can remain open for up to 15 years or until you turn 71
The FHSA is one of the most effective savings tools available to first-time buyers in Canada. If you are eligible and not yet using one, it is worth opening even if you can only contribute a small amount initially, because the contribution room begins accumulating the year you open the account.
Home Buyers’ Plan (HBP)
The HBP allows eligible first-time home buyers to withdraw up to $60,000 from their RRSP to use toward a down payment, tax-free at the time of withdrawal. If purchasing with a partner who also qualifies, each person can withdraw up to $60,000 for a combined total of $120,000.
The withdrawal must be repaid to your RRSP over a 15-year period starting two years after the first withdrawal. If you do not repay the required amount in a given year, that amount is added to your taxable income for that year. Our registered accounts post covers how RRSPs and TFSAs work if you want more background before using the HBP.
First-Time Home Buyers’ Tax Credit
A non-refundable federal tax credit available to first-time home buyers who purchase a qualifying home. You can claim up to $10,000 of the purchase price, which translates to a tax credit worth up to $1,500 (at the 15% federal credit rate). It is claimed on your tax return in the year you purchase the home.
To qualify, neither you nor your spouse or common-law partner should have owned and lived in another home in the current year or the previous four calendar years. Full eligibility details are available at canada.ca.
A Note on Land Transfer Tax
Beyond the down payment, most provinces charge a land transfer tax when you purchase a home. This is one of the largest closing costs buyers face and one that is easy to overlook when calculating how much you need to save.
| Province | Land transfer tax | First-time buyer rebate |
|---|---|---|
| Ontario | 0.5% to 2.5% of purchase price | Up to $4,000 rebate for first-time buyers |
| British Columbia | 1% to 3% of purchase price | Exemption for homes under $835,000 |
| Quebec | 0.5% to 1.5% of purchase price | Varies by municipality |
| Alberta | No provincial land transfer tax | N/A |
| City of Toronto | Additional municipal land transfer tax | Up to $4,475 rebate for first-time buyers |
Rates and rebate thresholds vary and are subject to change. Budget for closing costs of roughly 1.5% to 4% of the purchase price in addition to your down payment, which typically covers land transfer tax, legal fees, title insurance, and a home inspection.
Frequently Asked Questions About Down Payments in Canada
Can I use gift money for my down payment?
Yes. CMHC accepts non-repayable gifts from immediate family members as a valid down payment source. Your lender will typically require a signed gift letter confirming the funds are a gift and not a loan. There is no federal limit on the amount that can be gifted, but the full gift must be documented and in your account before closing. If the money is a loan that needs to be repaid, it generally does not qualify.
Can rental income help me qualify for a mortgage?
Yes, in many cases. If you are purchasing a property with a rental unit, or already have rental income, lenders and insurers can factor a portion of that income into your qualification. The income generally needs to be documented, either through a signed lease agreement or a history of rental income on your tax returns. The exact treatment varies by lender and insurer, so confirm the specifics with a mortgage professional.
Can I use both the FHSA and the HBP for the same purchase?
Yes. The FHSA and the HBP can be used together for the same qualifying home purchase, which means first-time buyers could potentially combine FHSA savings, an RRSP withdrawal under the HBP, and their own savings toward a down payment. The eligibility conditions for each program apply separately, so confirm you meet the requirements for both before proceeding.
Does a larger down payment mean a better mortgage rate?
Not necessarily. Insured mortgages (under 20% down) sometimes carry rates that are as competitive or lower than conventional mortgages because the lender’s risk is covered by the insurance. That said, rates vary by lender, market conditions, and your financial profile. Comparing rates from multiple lenders or working with a mortgage broker is the best way to find a competitive rate for your situation.
What is the maximum amortization period for a first-time buyer in Canada?
As of December 2024, first-time home buyers with an insured mortgage (less than 20% down) can amortize over 30 years, up from the previous 25-year maximum. This reduces monthly payments but increases total interest paid over the life of the mortgage. Buyers with a conventional mortgage (20% or more down) can also access 30-year amortizations. Rules are subject to change.
The Bottom Line
You do not necessarily need 20% saved to buy a home in Canada. But understanding the full cost picture, including mortgage default insurance, land transfer tax, and closing costs, is essential before you start making offers. The minimum down payment gets you in the door; a larger down payment reduces your long-term costs.
The FHSA and HBP are two of the most powerful tools available to first-time buyers and are worth exploring early in the saving process. If you are still building your savings, our post on building savings from scratch covers habits and strategies that apply just as well to a down payment goal as to an emergency fund.
Financial Disclaimer: The information in this post is for educational purposes only and does not constitute financial advice. PlanSmartFi is not a financial advisor. Mortgage rules, program details, insurance premiums, tax rates, and rebate thresholds are set by federal and provincial governments and are subject to change. Always verify current requirements with a licensed mortgage professional and consider speaking with a financial advisor before making any home buying decisions.