Down Payment Rules in Canada

Your down payment is the single largest upfront cost of buying a home. Canada has a tiered minimum down payment system set by the federal government, and these rules apply nationwide with no variation by province. Understanding the tiers, how they interact, and where your down payment funds can come from is essential before you start shopping.

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The Minimum Down Payment Structure

The minimum down payment you need depends on the purchase price of the home. There are three tiers:

Purchase Price	Minimum Down Payment
$500,000 or less	5% of the purchase price
$500,001 to $1,499,999	5% of the first $500,000 + 10% of the portion above $500,000
$1,500,000 or more	20% of the purchase price

The key thing to understand is that the tiers are marginal, similar to how income tax brackets work. For homes between $500,001 and $1,499,999, you pay 5% on the first $500,000 and 10% only on the amount above $500,000. You do not pay 10% on the entire purchase price.

For homes priced at $1,500,000 or above, the minimum down payment jumps to a flat 20% of the full purchase price. These homes are not eligible for mortgage default insurance (CMHC insurance), which means you must come up with the full 20% from your own resources.

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Worked Examples

Let’s walk through four real scenarios at different price points so you can see exactly how the math works.

Example 1: Starter Condo at $350,000

This might be a one-bedroom condo in a mid-sized city like Ottawa, Hamilton, or Edmonton.

• Minimum down payment: $350,000 x 5% = $17,500
• Mortgage amount: $350,000 - $17,500 = $332,500
• Since the down payment is less than 20%, you will also need to pay CMHC mortgage insurance (covered in the next section).

With a 5% down payment, you would need roughly $17,500 in savings plus an additional $10,000 to $15,000 for closing costs. A realistic savings target for this purchase would be approximately $30,000.

Example 2: Townhouse at $550,000

A common price point for townhouses in suburban areas of Toronto, Vancouver’s Fraser Valley, or parts of Calgary.

• 5% on the first $500,000 = $25,000
• 10% on the remaining $50,000 = $5,000
• Total minimum down payment: $30,000 (5.5% of purchase price)
• Mortgage amount: $550,000 - $30,000 = $520,000

Notice how crossing the $500,000 threshold means you need a larger percentage on the portion above $500,000. The blended rate works out to 5.5% instead of a flat 5%.

Example 3: Semi-Detached Home at $800,000

This is a realistic price for a semi-detached home in many Toronto or Vancouver-area neighbourhoods.

• 5% on the first $500,000 = $25,000
• 10% on the remaining $300,000 = $30,000
• Total minimum down payment: $55,000 (6.9% of purchase price)
• Mortgage amount: $800,000 - $55,000 = $745,000

At this price point, the minimum down payment is nearly $55,000, and you are still paying mortgage insurance on top of your mortgage. Many buyers at this level try to save closer to 10% or even 20% to reduce or eliminate insurance costs.

Example 4: Detached Home at $1,500,000

A detached home in a major urban market like Toronto, Vancouver, or certain parts of the GTA.

• Minimum 20% down: $1,500,000 x 20% = $300,000
• Mortgage amount: $1,500,000 - $300,000 = $1,200,000
• No mortgage insurance is required (or available) at this price point.

The jump from the second tier to the third tier is dramatic. At $1,499,999, your minimum down payment would be approximately $125,000 (about 8.3%). At $1,500,000, it jumps to $300,000 (20%). This cliff is important to understand if you are shopping near that price range.

Tip

Just because the minimum down payment is 5% does not mean you should always put down the minimum. A larger down payment means lower mortgage insurance premiums, lower monthly payments, and less total interest paid over the life of the mortgage. However, do not drain your savings completely — keep a reserve for closing costs, moving expenses, and an emergency fund of at least three months of housing costs.

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Acceptable Sources of Down Payment

Lenders are required to verify where your down payment came from. This is called sourcing your down payment, and it is taken very seriously. You will need to provide documentation showing the origin of every dollar. Acceptable sources include:

• Personal savings — Bank statements showing a gradual accumulation of funds over at least 90 days. A sudden large deposit will trigger questions.
• FHSA withdrawals — Tax-free withdrawals from your First Home Savings Account for a qualifying purchase.
• RRSP withdrawals under the HBP — Up to $60,000 per person through the Home Buyers’ Plan (must be repaid over 15 years).
• TFSA withdrawals — You can withdraw from your TFSA at any time for any reason, including a down payment, with no tax consequences.
• Gifts from immediate family — Parents, grandparents, or siblings can gift you money for a down payment. You will need a signed gift letter confirming the funds are a true gift with no expectation of repayment, along with proof of the transfer.
• Sale of another property — Proceeds from selling a property you own.
• Non-repayable government grants — Some provinces offer grants or forgivable loans for first-time buyers (varies by province).

Sources That Are NOT Acceptable

For insured mortgages (less than 20% down), borrowed funds generally cannot be used as your down payment. This includes:

• Credit card cash advances
• Personal loans
• Lines of credit (including HELOCs from other properties in some cases)
• Borrowed funds from friends

Some exceptions exist for uninsured mortgages, but the standard rule for first-time buyers with less than 20% down is that your down payment cannot be borrowed money.

Caution

Lenders will scrutinize your bank statements for the 90 days before your mortgage application. Large, unexplained deposits will need to be documented. If you receive a gift, make sure the money is transferred and the gift letter is signed well before you apply. Last-minute gifts raise red flags and can delay your approval.

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Planning Your Down Payment Strategy

When deciding how much to put down, consider these factors:

1. Mortgage insurance costs — Putting down less than 20% triggers insurance premiums that can add tens of thousands to your total cost. Even increasing your down payment from 5% to 10% significantly reduces the premium.

2. Opportunity cost — Money locked in your home cannot be invested elsewhere. Some buyers prefer a smaller down payment and invest the difference, though this carries risk.

3. Cash reserves — You need money beyond the down payment for closing costs (typically 1.5% to 4% of the purchase price), moving expenses, immediate repairs, and an emergency fund.

4. Monthly cash flow — A larger down payment means a smaller mortgage and lower monthly payments, giving you more room in your budget for other expenses.

A common sweet spot for first-time buyers is 10% to 15% down. This reduces mortgage insurance costs meaningfully while still keeping your savings timeline realistic.

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Next: CMHC Mortgage Insurance