How Much Mortgage Down Payment Do You Really Need to Buy a Home in Canada?

Buying a home is exciting, but it also comes with one big question: how much do you really need for a mortgage down payment? For many Canadians, this is the single largest financial hurdle on the road to homeownership. Some people think you need a 20 percent down payment, while others are aware of low-down-payment mortgage options that make buying easier. The truth lies somewhere in between.

If you’re wondering how much cash you’ll actually need before getting the keys, you’re not alone. Rising home prices across Canada have made this question more important than ever. But don’t worry. In this blog post, we’ll break it all down clearly. You’ll learn what a down payment is, the minimum you need depending on the price of the home, what happens if you put down less than 20 percent, and whether it’s smarter to save for a bigger down payment.

What Is a Down Payment and Why Does It Matter When Buying a Home?

A down payment is the portion of the home’s purchase price you pay up front. It’s not funded through your mortgage but comes directly from your savings or other resources. In Canada, down payments are required by law. The larger your down payment, the less you need to borrow, and the lower your monthly mortgage payments will be.

If you’re buying a $500,000 home and you put down 10 percent ($50,000), your mortgage will cover the remaining $450,000. But if you put down 20 percent ($100,000), you’ll only need to borrow $400,000, which means less interest over time and potentially better mortgage terms.

Down payments also matter because they show lenders that you have financial discipline and skin in the game. The more you put down, the less risky you look as a borrower. That’s why many lenders offer more favorable rates and conditions when you make a larger down payment.

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How Much Is the Minimum Down Payment Required in Canada?

In Canada, the minimum down payment depends on the price of the home you want to buy:

• For homes priced at $500,000 or less, the minimum down payment is 5 percent.
• For homes priced between $500,000 and $999,999, the minimum is 5 percent on the first $500,000 and 10 percent on the portion above $500,000.
• For homes priced at $1 million or more, the minimum down payment is 20 percent.

Say you want to buy a $750,000 home. You’ll need 5 percent on the first $500,000 ($25,000) and 10 percent on the remaining $250,000 ($25,000). That means your total minimum down payment will be $50,000. It’s also worth noting that lenders require you to prove the source of your down payment. Whether it comes from savings, your RRSP, or a gift from a family member, you’ll need to provide documentation that shows where the funds are coming from.

Does the Home Price Affect How Much I Need for a Down Payment?

Yes, the home price directly affects your required down payment. The higher the price, the more you’ll need to put down, especially once you cross into the million-dollar range. In fact, this is why many buyers in Toronto, Vancouver, and other expensive markets face bigger challenges when saving for a home.

It’s not just about the minimum percentage either. A higher-priced home means you’ll also face larger closing costs, property taxes, and ongoing expenses. That’s why it’s smart to factor all of these into your budget early on.

Keep in mind that the mortgage rules in Canada are designed to ensure buyers don’t overextend themselves. By requiring higher down payments on expensive homes, regulators aim to reduce risk for both lenders and borrowers.

What Happens If My Down Payment Is Less Than 20%?

If your mortgage down payment is less than 20 percent, your loan is considered a high-ratio mortgage. In this case, you’ll be required to purchase mortgage default insurance, often referred to as CMHC insurance (although it’s also offered by Sagen and Canada Guaranty).

This insurance protects the lender in the event of default, but the cost is passed on to you. The premium ranges from 2.8 to 4 percent of your mortgage amount, depending on the size of your down payment. For example, if you put down 5 percent on a $400,000 mortgage, you’ll pay a premium of 4 percent, or $16,000. This amount can usually be added to your mortgage and paid off over time.

While paying for insurance isn’t ideal, the benefit is that it allows you to buy a home sooner without having to wait until you have 20 percent saved up. For many first-time buyers, this trade-off makes sense, especially in markets where home prices are rising quickly.

Are There Programs to Help First-Time Homebuyers with a Down Payment?

Yes, Canada offers several programs designed to make homeownership more accessible. If you’re a first-time buyer, you may qualify for:

• The First-Time Home Buyer Incentive (FTHBI): This program has ended. It closed to new applications in 2024 and is no longer available. It was a shared-equity program in which the government contributed 5 or 10 percent of a home’s price toward the down payment, repayable on sale or after 25 years. It is listed here because buyers still ask about it.
• The Home Buyers’ Plan (HBP): This allows you to withdraw up to $60,000 from your RRSP to use toward your down payment, tax-free, as long as you repay it within 15 years.
• The First Home Savings Account (FHSA): Introduced in 2023, this account lets you save up to $8,000 per year (to a maximum of $40,000) for a down payment. Contributions are tax-deductible, and withdrawals are tax-free when used to buy your first home.

These programs can be powerful tools for stretching your savings and reducing the time it takes to reach your goal. If you’re unsure which option is best for you, speaking with a mortgage broker can help clarify the details.

Is It Better to Put a Larger Down Payment on a Mortgage?

In most cases, yes. A larger down payment reduces the amount you borrow, lowers your monthly payments, and decreases the total interest you’ll pay over the life of your mortgage. It can also help you avoid paying mortgage insurance if you put down at least 20 percent.

Let’s say you’re buying a $600,000 home. If you put down the minimum $35,000 (5 percent on the first $500,000 and 10 percent on the remaining $100,000), your mortgage will be $565,000 plus insurance. But if you save up and put down 20 percent ($120,000), your mortgage shrinks to $480,000, with no insurance costs. That’s a big difference in both monthly payments and long-term savings.

That said, there are situations where putting down less can make sense. If waiting to save 20 percent means delaying your purchase by several years while prices continue to rise, you may end up paying more overall. The key is finding the balance that works for your financial situation and timeline.

How Can I Save Faster for a Mortgage Down Payment in Canada?

Saving for a down payment can feel daunting, but there are practical steps you can take to speed up the process:

1. Set a clear target. Know exactly how much you need for your chosen price range and create a timeline for reaching it.
2. Use tax-advantaged accounts. Maximize contributions to your FHSA and RRSP, since both offer tax benefits that help your savings grow faster.
3. Automate your savings. Set up automatic transfers to a dedicated down payment account each payday. Treat it like a bill you can’t skip.
4. Cut unnecessary expenses. Even small changes, like reducing takeout or streaming subscriptions, can add up over time.
5. Consider side income. Freelancing, part-time work, or gig opportunities can accelerate your savings.
6. Look for matching programs. Some employers offer RRSP matching, which can be used for the HBP program when buying your first home.

The sooner you start, the easier it becomes. Think of it as building momentum. Once you see your down payment fund growing, you’ll be motivated to keep going.

Call Fusion Mortgage Group Today to Explore Low Down Payment Mortgage Options

At Fusion Mortgage Group, I help you sort through your options, including low down payment mortgage programs that can help you buy a home sooner. Every buyer’s situation is unique, which is why I take the time to understand your goals and match you with the right lender and product.
Whether you’re a first-time buyer using government programs or a repeat buyer looking for the best rate, I’ll guide you through the process in plain language and with full transparency. Call me today at 289-723-2126 or visit fusionmortgagegroup.com to get started.