The down payment is the single biggest barrier to homeownership for most Canadians. Here is exactly how much you need, how CMHC insurance works at each level, where to find the money, and when it makes sense to buy with less than 20%.
Minimum down payment requirements
Canada’s down payment rules are set by the federal government and depend on the purchase price:
| Purchase Price | Minimum Down Payment | Rule |
|---|---|---|
| Up to $500,000 | 5% | Mortgage insurance required (CMHC/Sagen/Canada Guaranty) |
| $500,001 – $1,500,000 | 5% on first $500K + 10% on balance | Mortgage insurance required |
| Above $1,500,000 | 20% | Not eligible for mortgage insurance |
Examples at common price points
| Purchase Price | Minimum Down Payment | Down Payment Amount | Insured? |
|---|---|---|---|
| $300,000 | 5% | $15,000 | Yes |
| $400,000 | 5% | $20,000 | Yes |
| $500,000 | 5% | $25,000 | Yes |
| $600,000 | 5% + 10% split | $35,000 | Yes |
| $700,000 | 5% + 10% split | $45,000 | Yes |
| $800,000 | 5% + 10% split | $55,000 | Yes |
| $1,000,000 | 5% + 10% split | $75,000 | Yes |
| $1,200,000 | 5% + 10% split | $95,000 | Yes |
| $1,500,000 | 5% + 10% split | $125,000 | Yes (new 2024 rule) |
| $1,600,000 | 20% | $320,000 | No — not eligible |
| $2,000,000 | 20% | $400,000 | No |
2024 policy change: The insured mortgage cap was raised from $1 million to $1.5 million, meaning buyers in expensive markets like Toronto and Vancouver can now purchase homes up to $1.5M with less than 20% down.
CMHC mortgage insurance costs
When your down payment is less than 20%, you must pay mortgage default insurance. The premium depends on your loan-to-value ratio (how much you borrow vs. the home value):
| Down Payment % | Loan-to-Value | CMHC Premium (% of mortgage) | Premium on $400K Mortgage | Premium on $600K Mortgage |
|---|---|---|---|---|
| 5% | 95% | 4.00% | $15,200 | $22,600 |
| 10% | 90% | 3.10% | $11,160 | $16,740 |
| 15% | 85% | 2.80% | $9,520 | $14,280 |
| 19.99% | 80.01% | 2.40% | ~$7,700 | ~$11,500 |
| 20%+ | 80% or less | $0 | $0 | $0 |
The premium is added to your mortgage balance, so you pay interest on it over the full amortization. Some provinces also charge PST on the CMHC premium:
| Province | PST on CMHC Premium | Paid At |
|---|---|---|
| Ontario | 8% of premium | Closing (cash — not added to mortgage) |
| Quebec | 9% of premium | Closing (cash) |
| Saskatchewan | 6% of premium | Closing (cash) |
| Manitoba | 7% of premium | Closing (cash) |
| BC, Alberta, Atlantic | No PST on premiums | — |
Example: On a $500,000 home with 5% down ($25,000), the mortgage is $475,000. CMHC premium is 4.00% × $475,000 = $19,000, added to the mortgage for a total of $494,000. In Ontario, you also pay 8% × $19,000 = $1,520 in PST at closing.
5% down vs. 20% down: The real math
The debate over minimum vs. maximum down payment depends on your specific situation:
Scenario: $500,000 home, $100,000 household income
| Factor | 5% Down ($25,000) | 20% Down ($100,000) |
|---|---|---|
| Mortgage amount | $475,000 + $19,000 CMHC = $494,000 | $400,000 |
| Monthly payment (5%, 25 yr) | $2,880 | $2,330 |
| CMHC insurance cost | $19,000 (rolled into mortgage) | $0 |
| Time to save down payment (saving $1,500/month) | ~1.4 years | ~5.6 years |
| Total interest paid (25 yr) | ~$370,000 | ~$299,000 |
| Equity after 5 years (assuming 3% annual appreciation) | ~$125,000 | ~$144,000 |
The hidden cost of waiting
If you wait 4 years to save 20% while prices appreciate 3% annually:
| Factor | Buy Now at 5% Down | Wait 4 Years for 20% Down |
|---|---|---|
| Purchase price | $500,000 (today) | $563,000 (after 3%/yr appreciation) |
| Down payment needed | $25,000 | $112,600 |
| Mortgage amount | $494,000 (with CMHC) | $450,400 |
| CMHC premium | $19,000 | $0 |
| Rent paid while waiting (4 years × $2,000/month) | $0 (you own) | $96,000 |
| Equity built in 4 years of ownership (payments + appreciation) | ~$95,000 | $0 |
| Net position after 4 years | ~$95,000 equity, paying mortgage | Just bought, $96K spent on rent |
In most markets, buying sooner with 5% down puts you ahead — even after paying CMHC insurance — because you capture price appreciation and build equity through mortgage payments instead of paying rent.
When 20% down IS worth waiting for:
- Homes priced above $1.5 million (insurance not available — 20% is mandatory)
- Markets where prices are flat or declining
- If you are already close to 20% and only need a few more months
- If 5% down would stretch your debt ratios to the absolute limit
Where to source your down payment
Tax-advantaged sources (use these first)
| Source | Maximum | Tax Benefit | Repayment? |
|---|---|---|---|
| FHSA | $40,000 + investment growth | Tax deduction on contribution, tax-free withdrawal | No |
| RRSP — Home Buyers’ Plan | $60,000 per person | Tax deduction on contribution, no tax on withdrawal | Yes — over 15 years |
| TFSA | Full balance (no limit for housing) | Tax-free growth, tax-free withdrawal | No (room returns Jan 1 next year) |
Maximum tax-advantaged down payment for a couple: $40,000 + $40,000 (FHSA) + $60,000 + $60,000 (HBP) + TFSA balances = $200,000+ before touching a single taxable dollar.
Other acceptable sources
| Source | Requirements | Impact on Qualification |
|---|---|---|
| Gifted funds from immediate family | Signed gift letter stating no repayment required | No impact — treated as own funds |
| Personal savings (non-registered) | 3 months of bank statements showing accumulation | None |
| Sale of property | Proof of sale proceeds | None |
| Borrowed down payment (line of credit, personal loan) | Must be disclosed to lender | Loan payments added to TDS ratio — reduces qualification |
| Sweat equity (on new builds in some programs) | Builder/lender approval required | Rare — some affordable housing programs allow it |
Sources that are NOT acceptable
| Source | Why |
|---|---|
| Cash with no paper trail | Anti-money laundering rules require sourcing all funds |
| Undisclosed loans from friends | If discovered during underwriting, mortgage will be declined |
| Cash advances on credit cards | Treated as unsecured debt, raises red flags |
| Cryptocurrency (without conversion history) | Must be converted to CAD with documented transaction history |
Down payment savings strategies
How quickly you can save at different rates
| Monthly Savings | Time to $25,000 (5% on $500K) | Time to $50,000 (10% on $500K) | Time to $100,000 (20% on $500K) |
|---|---|---|---|
| $500 | 4.2 years | 8.3 years | 16.7 years |
| $1,000 | 2.1 years | 4.2 years | 8.3 years |
| $1,500 | 1.4 years | 2.8 years | 5.6 years |
| $2,000 | 1.0 years | 2.1 years | 4.2 years |
| $3,000 | 0.7 years | 1.4 years | 2.8 years |
Assumes 4% return in HISA/GIC. Actual time may be shorter with FHSA tax deductions reinvested.
Optimal savings account strategy
| Time to Purchase | Where to Save | Why |
|---|---|---|
| 0–1 year | HISA or GIC (inside FHSA and/or TFSA) | Capital preservation — you cannot afford to lose it |
| 1–3 years | HISA, GIC ladder, or conservative balanced fund (inside FHSA/TFSA) | Slight growth potential with limited downside |
| 3–5 years | Balanced ETF portfolio (inside FHSA/TFSA) | Longer horizon allows some equity exposure |
| 5+ years | Growth-oriented portfolio (inside FHSA/TFSA) | Maximize returns before eventually needing the funds |
Down payment amount decision framework
| Your Situation | Recommended Down Payment | Why |
|---|---|---|
| First-time buyer, rising market | 5% (minimum) | Get in sooner, capture appreciation, use FHSA/HBP |
| Buying above $1.5M | 20% (mandatory) | Insurance not available |
| Very tight debt ratios | 10–15% | Lower mortgage reduces payments, improves GDS/TDS |
| Interest rates are very high | Larger down payment if possible | Reduces total borrowing cost at high rates |
| Self-employed or irregular income | 10–20% | Stronger application, more lender options |
| Already have 18–19% saved | Top up to 20% | $1–2K more saves $10,000+ in CMHC insurance |