Down Payment 101: How Much Do You Actually Need?

The down payment question comes up in almost every first conversation I have with a new client. How much do you actually need? Is 5% enough? Should you put down more if you have it? What if you're borrowing from your parents? There's a lot of noise out there about down payments in Canada, so let me break it all down clearly so you can make the right decision for your situation.

The Minimum Down Payment Rules in Canada

Canada has tiered minimum down payment rules based on the purchase price of the home. Here's how it works as of 2026:

Homes under $500,000: Minimum 5% down. So on a $450,000 home, the minimum down payment is $22,500.

Homes between $500,000 and $1,499,999: 5% on the first $500,000, and 10% on the remaining portion. So on a $700,000 home, it's $25,000 (5% of $500K) plus $20,000 (10% of $200K) = $45,000 minimum. On a $1,200,000 home, it's $25,000 plus $70,000 (10% of $700K) = $95,000 minimum.

Homes $1,500,000 and over: Minimum 20% down. No exceptions. Properties at this price point cannot use insured (high-ratio) mortgages. Note: As of December 15, 2024, the insured mortgage cap was raised from $1M to $1.5M, meaning more Canadians can now access insured mortgages with less than 20% down.

These are the absolute floors. Lenders can — and sometimes do — require more depending on the property type, your credit profile, or other factors.

What Is Mortgage Default Insurance and Do You Have to Pay It?

If you put down less than 20%, your mortgage is called a "high-ratio" mortgage, and you're required by law to purchase mortgage default insurance through CMHC, Sagen, or Canada Guaranty. This insurance protects the lender (not you) in case you default — but the premium comes out of your pocket. Since December 15, 2024, insured mortgages are available on homes up to $1.5M (up from the previous $1M cap).

The premium is calculated as a percentage of your mortgage amount. Here's how it breaks down:

For a standard 25-year amortization: Down payment of 5–9.99%: 4.00% premium. Down payment of 10–14.99%: 3.10% premium. Down payment of 15–19.99%: 2.80% premium. Down payment of 20% or more: 0% — no insurance required.

If you choose a 30-year amortization (available to first-time buyers and new build buyers since December 2024), CMHC adds a 0.20% surcharge: 5% down = 4.20% premium, 10% down = 3.30%, 15% down = 3.00%. A small but real extra cost to factor in when deciding between 25 and 30 years.

This premium is added to your mortgage balance, not paid upfront (though you do pay PST on it at closing in some provinces). On a $400,000 mortgage with 5% down, the insurance premium is $16,000 — which gets added to your mortgage, so you're now borrowing $416,000 and paying interest on that premium for the life of the mortgage.

One more important update: as of December 15, 2024, first-time home buyers and buyers of newly-built homes can access 30-year amortizations on insured mortgages (previously capped at 25 years). The longer amortization reduces your monthly payment, which may help you qualify for a larger purchase. Keep in mind that a longer amortization does mean more total interest paid over the life of the mortgage.

This is one reason why putting down more than the minimum makes financial sense when you can afford to.

The 20% Threshold: Is It Worth It?

Putting down 20% is often treated like a magic number, and there's good reason for that. Once you hit 20%, you avoid mortgage default insurance entirely, which saves you thousands of dollars. You also access a wider range of lenders and mortgage products, and your monthly payment is lower because you're borrowing less.

That said, I always caution clients against raiding their emergency fund or retirement savings just to hit 20%. Owning a home comes with unexpected costs — furnace repairs, roof issues, leaking pipes. If you wipe out your savings to make a larger down payment and then face a $10,000 repair in year two, that's a stressful situation. Sometimes putting down 10–15% and keeping a financial cushion makes more sense than stretching to 20%.

The math isn't always cut and dried. I work through this calculation with my clients all the time — let's figure out what makes sense for you specifically.

Acceptable Sources of Down Payment

Not all money is equal in the eyes of a mortgage lender. Your down payment needs to come from acceptable sources, and you need to be able to document it. Here's what lenders accept:

Personal savings. Money sitting in your chequing, savings, or TFSA accounts — with a 90-day history of being in your account. Lenders want to see that the money has been there, not that it suddenly appeared last week.

RRSP Home Buyers' Plan. As of Budget 2024, first-time buyers can withdraw up to $60,000 from their RRSP tax-free under the Home Buyers' Plan — that's $120,000 per couple if both partners qualify (up from the old $35,000/$70,000 limits). The funds need to have been in the RRSP for at least 90 days before withdrawal, and repayment starts within five years of withdrawal.

Gifts from immediate family members. Parents giving their children a down payment gift is very common in Canada. Lenders accept this but require a signed gift letter confirming the money is a gift and not a loan. The gift also needs to be in your account before closing, with documentation.

Proceeds from the sale of another property. If you're selling a home and using the equity as your down payment on the next one, that's perfectly acceptable — just make sure you have documentation of the sale.

Non-repayable grants and programs. There are various first-time buyer programs and municipal grants that can help with down payments. These are generally accepted, but always verify with your broker.

What lenders don't like: borrowed down payments. If you're borrowing money from a line of credit or personal loan to fund your down payment, that's treated very differently — it affects your debt ratios and can impact your approval.

The First Home Savings Account (FHSA)

One of the best tools for first-time buyers right now is the First Home Savings Account, introduced in 2023. It combines the best features of the RRSP and TFSA: contributions are tax-deductible (like an RRSP), and withdrawals for a qualifying home purchase are tax-free (like a TFSA). You can contribute up to $8,000 per year, with a lifetime limit of $40,000.

If you're a first-time buyer and you haven't opened an FHSA yet, do it today. Even if you only put a small amount in, you start accumulating contribution room and tax deductions. It's genuinely one of the best savings vehicles the government has ever offered for homebuyers. Read our full guide on stacking your FHSA and RRSP Home Buyers' Plan in Calgary to see how to combine both for maximum impact.

How Much Down Payment Should You Actually Put Down?

The honest answer is: it depends. If you're buying a $400,000 home and you have $80,000 saved (20%), putting it all down eliminates the insurance premium and gives you a lower monthly payment. But if that $80,000 represents everything you have and you'd have no emergency fund, going with 10% or 15% down and keeping some cash back might serve you better in the long run.

For clients with the financial cushion to support it, more down payment is usually better. For clients who are newer to saving or carrying other debt, the minimum viable down payment combined with a solid financial buffer often makes more sense. Every situation is different, and I love working through these numbers with clients to find the right balance.

Let's Work Through the Numbers Together

Down payment planning is something I do with every single client I work with. Whether you're saving right now or you already have the money ready, let's sit down, run through the numbers, and figure out exactly what your mortgage picture looks like.