If you’re buying a home in Canada, you’ll need to save up some cash to put down in the form of a down payment. Given the high cost of homes in various markets across Canada, your down payment will likely be a sizable amount, so make sure you give yourself enough time to save up for this sum of money before you start the search for a new home.
Let’s go over down payments in more detail to help you prepare for the mortgage process.
A down payment is a lump sum of money that goes towards the purchase price of a home and is typically required to secure a mortgage. The exact amount of a down payment can range from anywhere between 5% to 20% or more and is based on several factors, including:
There is often some confusion between a down payment and a home deposit. While some buyers may assume that they are the same thing, they are, in fact, different.
A home deposit is a sum of money paid upfront at the time of a home offer and serves as an indication to the seller that the buyer is serious about the transaction and has the financial means to carry out the process.
The deposit amount will eventually go towards the down payment. While both sums of money will count towards the purchase price of the home, they serve different purposes. The home deposit is something that the seller is required to ensure the buyer is serious about the deal, and the down payment is required by the lender to complete the mortgage approval process.
The minimum down payment amount in Canada is 5% when the purchase price of the home is $500,000 or less. For properties that are over $500,000, the minimum down payment amount takes a tiered approach, as follows:
| Home Price | Minimum Down Payment (% of Purchase Price) |
| Up to and including $500,000 | 5% |
| $500,000 – $999,999 | -5% of the first $500,000 -10% for the amount over $500,000 |
| $1 million+ | 20% |
The down payment amount you make will determine whether or not you’ll be required to pay mortgage default insurance, which is an additional payment on top of your mortgage payments.
Mortgage default insurance is a specific type of coverage meant to protect lenders in case a borrower defaults on their mortgage. When your down payment is less than 20% of the purchase price of the home, you’ll be subject to mortgage default insurance.
When the loan-to-value ratio (LTV) of a mortgage is very high, the risk is also high for the lender. A higher loan amount means you have less equity in the home, which puts both you and the lender at risk.
For example, if you happen to default on your mortgage the lender will repossess the home and sell it to recoup their losses. But if the home sells for less than what the lender loaned out, the insurer will compensate the lender accordingly for any shortfalls.
The Canada Mortgage Housing Corporation (CMHC) is the national housing agency of Canada and provides mortgage default insurance policies.
The CMHC insurance premium charged is based on a percentage of the loan and the size of the down payment. The higher the loan-to-value ratio, the higher percentage you’ll be charged in insurance premiums:
| LTV | Premium on Total Loan |
| Up to and including 65% | 0.60% |
| Up to and including 75% | 1.70% |
| Up to and including 80% | 2.40% |
| Up to and including 85% | 2.80% |
| Up to and including 90% | 3.10% |
| Up to and including 95% | 4.00% |
Find out if you can avoid paying the CMHC Fees?
The bigger your down payment, the lower the loan you’ll need to take out. That also means lower mortgage payments and more equity in your home.
To illustrate how the down payment amount affects the total cost of your mortgage, let’s assume the following:
| 5% Down Payment | 10% Down Payment | 15% Down Payment | 20% Down Payment | |
| Down Payment | $22,500 | $45,000 | $67,500 | $90,000 |
| Mortgage Default Insurance | $17,100 | $12,555 | $10,710 | N/A |
| Total Mortgage Required | $444,600 | $417,555 | $393,210 | $360,000 |
| Monthly Mortgage Payment | $2,220 | $2,085 | $1,963 | $1,797 |
Putting less toward your home purchase will not only mean more money owed on your loan, but it will also mean higher mortgage default insurance costs and higher monthly payments.
There are pros and cons to both high and low down payments. Be sure to weigh them before you decide how much to put down upfront when taking out a mortgage.
Besides taking the time to put a few dollars away every month to save up for a down payment, there are other ways to source these funds:
RRSPs. You can tap into your RRSP if you’re a first-time homebuyer. The RRSP Home Buyers’ Plan allows buyers to withdraw funds tax-free, though the borrowed funds must be repaid within 15 years.
Line of credit. If you have a line of credit, you can use that available credit to put towards your down payment.
Proceeds from the sale of a property. If you already own a piece of property and have intentions to sell it, you can use the proceeds of the sale to be put towards the purchase of another property.
Monetary gift. You can use money given to you as a gift from your parents or other immediate family members. You’ll need to show the lender a gift letter that stipulates that the money is not a loan that will have to be paid back.
Some provincial governments offer financial assistance to first-time buyers in the form of income tax credits, land transfer tax rebates, and even cash payments. In addition to the federal First-Time Home Buyers’ Tax Credit, provincial and municipal programs may also be available.
The following chart displays some of the provincial down payment assistance programs available to eligible borrowers:
| Province | Program | Program Info |
| Saskatchewan | National Affordable Housing Corporation’s Down Payment Assistance Program | 3% non-repayable down payment grant. |
| Nova Scotia | Down Payment Assistance Program (DPAP) | Interest-free repayable loan of up to 5% of the purchase price of a home. |
| New Brunswick | Home Ownership Program | Interest-free loan of up to $75,000 for first-time buyers with incomes less than $30,000 |
| Prince Edward Island | Down Payment Assistance Program (DPAP) | Interest-free loan of up to 5% of the purchase price of a home, up to a maximum loan of $15,000. |
The federal government has a couple of down payment assistance programs to offer:
First-time homebuyers may be eligible for the Home Buyers’ Plan (HBP), which allows up to $35,000 to be withdrawn from an RRSP account, tax-free. You must repay the funds within 15 years after withdrawal.
Keep in mind that if you fail to repay the funds, you’ll be stuck with excess income taxes owed and could lose out on growing your RRSPs.
First-time home buyers may also qualify for a shared equity mortgage with the Government of Canada without interest. You’ll receive 5% of the purchase price of a home, or 5% to 10% of the purchase price of a new home. The funds must be repaid after 25 years or when you sell the home.
The government of Canada got rid of zero down payment mortgages over a decade ago, but it may still be possible for you to secure financing with no down payment by borrowing the minimum down payment. You can use your credit card or line of credit to borrow the minimum down payment for the mortgage you’re applying for.
That said, a zero-down payment mortgage is probably not a good idea, as they’re much riskier and will leave with no equity and a ton of interest.
If you do decide to go for a zero down payment mortgage, there are a few ways to go about obtaining one:
Mortgage Down Payment FAQs
How can I get a mortgage with no down payment and bad credit in Canada?
To get approved for a zero down payment mortgage, you’ll typically require a good credit score. Otherwise, you’ll probably have a tough time getting approved. Do you have to pay your mortgage default insurance upfront?
While you may have the option to pay for your mortgage default insurance upfront in one lump sum, these fees can be rolled into your mortgage payments. How much does a home deposit need to be?
Depending on the exact location of the transaction, there may be standard deposit amounts. In more expensive areas, for example, higher home deposit amounts may be more typical. That said, there is no hard and fast rule about how much a home deposit must be, as long as the seller accepts it.
Unless you can swing a zero down payment mortgage, a down payment is a requirement for just about all home loans in Canada. And while you may be able to put down as little as 5%, a higher down payment amount is always best to reduce your overall debt, keep your monthly mortgage payments low, and ensure more equity in the home you purchase.
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Lisa has been working as a personal finance writer for more than a decade, creating unique content that helps to educate Canadian consumers in the realms of real estate, mortgages, investing and financial health. For years, she held her real estate license in Toronto, Ontario before giving it up to pursue writing within this realm and related niches. Lisa is very serious about smart money management and helping others do the same.
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