First-Time Home Buyers
Many Canadians believe they need a 20% down payment before they can buy a home. Here is where that idea comes from, how minimum down-payment rules work, and why you may be closer to buying than you think.
The Important Difference
The amount required to buy and the amount that avoids mortgage default insurance answer two different questions.
The smallest down payment that may be permitted for the purchase price.
The point where a mortgage is generally considered conventional.
Planning Insight
I have spoken with people who spent years trying to save a 20% down payment because they believed it was the only way to buy a home.
Sometimes they are surprised to find out that they may have been much closer than they realized.
Buying sooner is not always the right decision. But understanding the actual rules lets you make the decision based on your own finances instead of a common mortgage myth.
The Minimum Required
The minimum down payment depends on the purchase price of the property.
$500,000 or less
5% of the purchase price
More than $500,000 but less than $1,500,000
5% on the first $500,000 and 10% on the remaining amount
$1,500,000 or more
At least 20% of the purchase price
These are minimum requirements. A lender may require a larger down payment depending on the property, your application, the source of your funds, or other lending considerations.
Example
Here is how the minimum down payment would be calculated:
First $500,000
5% down payment
$25,000
Remaining $150,000
10% down payment
$15,000
Minimum Down Payment
$40,000
In this example, the buyer would not need a $130,000 down payment, which would represent 20% of the purchase price.
The minimum down payment would be $40,000, subject to qualification, lender approval, and mortgage-insurance approval.
Below 20% Down
When your down payment is less than 20%, mortgage default insurance will usually be required.
Despite its name, this insurance does not protect the homebuyer. It protects the lender if the borrower is unable to repay the mortgage.
The buyer is generally responsible for the insurance premium. In most cases, the premium is added to the mortgage rather than paid entirely upfront.
Mortgage default insurance increases the amount borrowed, but it can also allow qualified buyers to purchase without spending several additional years trying to reach 20%.
The Advantages
Absolutely. A 20% down payment can provide meaningful advantages, including a smaller mortgage and no mortgage default insurance premium.
It may also reduce your monthly payment and give you more equity in the home from the beginning.
But using every dollar you have for the down payment is not always ideal. You may also need money for legal fees, property transfer tax where applicable, moving expenses, immediate repairs, furnishings, and an emergency fund.
The Bigger Picture
The goal is not simply to make the largest down payment possible. It is to choose an amount that supports both the purchase and your financial comfort after you move in.
Your Timing
There is no single answer that works for every buyer.
Continuing to save may reduce your mortgage, eliminate the default-insurance premium, or leave you with a more comfortable monthly payment.
Buying with less than 20% may allow you to move sooner, meet an important housing need, or stop waiting for a savings target that may not be required.
The better question is whether your down payment, mortgage payment, closing costs, and remaining savings create a sustainable home-buying plan.
Frequently Asked
Clear answers to some of the most common questions about this topic.
Possibly. For a home priced at $500,000 or less, the minimum down payment may be 5%, subject to lender approval and mortgage-insurance requirements.
Your mortgage will usually require mortgage default insurance. This insurance protects the lender, although the premium is generally paid by the borrower and added to the mortgage.
Usually not. The insurance premium is commonly added to the mortgage amount and repaid as part of your regular mortgage payments.
Not necessarily. A larger down payment can reduce your mortgage and eliminate the insurance premium, but waiting may not always be the best choice. Your timeline, savings, income, housing needs, and local market conditions all matter.
Generally, yes. You are borrowing less, and you will usually avoid the cost of mortgage default insurance. Your final payment will also depend on your interest rate, amortization, and mortgage structure.
Down Payment Calculator
Enter a potential purchase price to see how the minimum down payment may be calculated and compare it with a larger down payment.
What to Explore Next
Here are a few related answers, guides, and tools that may help you take the next step.
Mortgage Minute
See why mortgage default insurance exists, when it is required, and what it actually covers.
Mortgage Minute
Plan for the down payment, closing costs, moving expenses, and the savings you may want to keep after buying.
Mortgage Guide
Follow the home-buying journey from early planning through financing, making an offer, and receiving the keys.
Personal Guidance
Every purchase is different. I can help you understand how much down payment you may need, what other costs to plan for, and what monthly payment would feel comfortable before you begin shopping.
Need a Second Opinion?
I can help you work through the numbers and the next step.
Ask a Mortgage Question