One of the biggest misconceptions about buying a home is that you need a 20% down payment. While putting down more can reduce your mortgage amount, many homebuyers—especially first-timers—can qualify with much less. Let’s break down how much you actually need and what factors to consider.
What is a Down Payment?
A down payment is the initial amount you pay upfront when purchasing a home. The rest of the cost is covered by your mortgage. Your down payment size affects your loan amount, interest rates, and whether you need mortgage insurance.
Minimum Down Payment Requirements in Canada
✔ 5% Down – For homes up to $500,000
✔ 10% Down – For the portion of a home priced between $500,000 and $999,999
✔ 20% Down – Required for homes $1 million or more
For example, if you’re buying a $600,000 home:
- The first $500,000 requires 5% ($25,000)
- The remaining $100,000 requires 10% ($10,000)
- Total minimum down payment: $35,000
What If You Put Less Than 20% Down?
If your down payment is under 20%, you’ll need mortgage default insurance (CMHC insurance). This protects lenders in case of default but allows buyers to qualify with a lower down payment. The insurance cost depends on your down payment size and mortgage amount.
Benefits of a Larger Down Payment
✔ Lower Monthly Payments – Borrowing less means smaller mortgage payments.
✔ Better Mortgage Rates – Lenders may offer lower rates with a higher down payment.
✔ Avoid Mortgage Insurance – 20% down eliminates CMHC insurance costs.
✔ Build Equity Faster – More ownership in your home from day one.
How to Save for a Down Payment Faster
- Set a dedicated savings plan and budget accordingly.
- Explore RRSP Home Buyers’ Plan (HBP) to withdraw up to $35,000 tax-free.
- Look into First-Time Home Buyer Incentives for government assistance.
- Reduce unnecessary expenses and automate savings contributions.
Final Thoughts
You don’t always need 20% to buy a home! With as little as 5% down, you can start your homeownership journey. Need help determining the right amount for your situation? Let’s discuss your options and get you into your dream home faster.