Home Buying

How Much Down Payment Do You Need to Purchase a Home?

How Much Down Payment Do You Need to Purchase a Home?
Written by
  • tvine
| Jul 17, 2020
Reviewed, Jun 29, 2023

If you’re dreaming of becoming a homeowner in Canada, calculating how much you can afford to put towards a down payment is essential. Whatever your goal, there are ways to achieve it and enjoy the many financial benefits of homeownership. In this article, we’ll explore the minimum down payment requirements in Canada and discuss various down payment options, both traditional and non-traditional.

Key Highlights

  • When you are planning to purchase a house, one of the most important considerations is the down payment.
  •  The minimum down payment is 5% of the purchase price for a home valued at $500,000 or less and 10% for the portion of the purchase price above $500,000
  • With an average price of $800,000 for your dream condo in Vancouver, you’ll need to be ready to pay upfront a minimum of $55,000 as a down payment. Better start saving!

Are you a first-time buyer?

Where Down Payments Fall In the Home Buying Process – An Overview 

1. Find a real estate agent: A good starting point is finding a reliable, experienced real estate agent who can guide you through the process and help you find the perfect home.

2. Get pre-approved for a mortgage: Start by talking to your bank or other financial institution to get pre-approved for a mortgage so that you have an idea of the loan amount you can qualify for.

3. Research and compare homes: Next, do some research online to get a feel for what type of home is right for you. Compare different properties and narrow down your search to a few homes that meet your needs.

4. Make an offer: Once you find a home you like, make an offer to the seller and negotiate a final price.

5. Secure financing: After reaching an agreement on a price, secure financing from your financial institution and move forward with closing the deal. At this point, you’ll need to have your down payment ready (which will be the focus of this blog!).

6. Finalize paperwork: Your real estate agent will help you complete all of the necessary paperwork and submit it to the government for approval. 

7. Close on the home: After all of the paperwork is in order, you will be ready to close on the property and begin the process of moving into your new home!

8. Make sure you’re covered: Finally, make sure that you have enough coverage for your new purchase with home insurance and other policies. 

How Much You Need for a Down Payment on a House

Before purchasing a property, a future home buyer will need to provide a certain amount of money known as a down payment, which the lender will get when finalizing the transaction. In Canada, the lowest down payment required to buy a home depends on the price of the property you’re purchasing. There are 3 different levels based on the value of the property, whether the home you want to buy is valued at $500,000 or less, $500,000 to $999,999 or $1 million or more.

Why Are There Down Payment Requirements For Homebuying in Canada?

The down payment requirements for home buying in Canada are fairly straightforward, but will ultimately depend on the price of the property and your financial situation.

Down Payment Requirements in Canada

Canada does not have any strict rules surrounding down payments or how to fund them. For example, there are various savings accounts and incentives dedicated to help you build up a solid down payment, which we will explore in depth later. Another avenue that more and more first-time buyers are taking for their down payments is through monetary gifts from their parents or family members. 

As for down payment amounts, the minimum percentage will depend on the price of the property, which is an easy calculation we explore in the following section. However, while these requirements are easy to understand, your financial situation could create some obstacles in practice when  applying for a mortgage with a lender.

Current requirements set by lenders and governments

The minimum down payment percentage will vary depending on the purchase price of the property, but this is not always the case for every borrower. Lenders might require a larger down payment if they find some weak points in your financial situation. For example, things like large debt, bad credit, or unstable income sources might result in a lender asking you to put down a larger down payment. 

This is also the case for buyers shopping outside their budget. If a borrower’s monthly mortgage payments seem too large in relation to their income, it might be better for them to put down a larger down payment to reduce the size of the mortgage. 

Calculating Your Minimum Down Payment

To set the minimum down payment for a home in Canada, the calculation is based on the purchase price of the property. 

If the purchase price is $500,000 or less.

In this case, the minimum down payment will be 5% of the price. 

For instance, if the home costs $400,000, the minimum down payment required would be $20,000. 

If the purchase price is more than $500,000

In this case, there are 2 different possibilities:

If the purchase price is between $500,000 and $999,999

The calculation of the downpayment involves adding two amounts. You’ll begin by calculating 5% of the first $500,000, then 10% of the remaining balance.

For example, if the home you’re considering buying is valued at $600,000, the minimum down payment required would be $35,000 in total, which is the sum of $25,000 (5% of $500,000) and $10,000 (10% of $100,000).

If the property is valued at $1 million or more

Then the minimum down payment will be 20% of the value of the property.

For example, if the home you’re considering buying is valued at $1,500,000, the minimum down payment required would be $ 300,000.

If you’re still unsure, check out nesto’s down payment calculator to help you calculate different down payment options in different provinces.

Potential variations on down payment amounts and forms of payment

It’s important to know that down payments are not always made in the form of cash. 

Depending on your financial situation, you may be able to use other forms of payment such as investments or money from a loan. In certain cases, you might even be able to use funds from family members to help with the down payment. It is important to review all options with your lender before committing to a down payment.

The amount of the down payment will also vary depending on your loan type, credit score, and other factors. Generally speaking, if you have good credit and are able to make a larger down payment then you may be eligible for lower interest rates and better terms on your loan.  

Using Mortgage Loan Insurance for Down Payments Under 20%

If you’re putting less than 20% as a down payment, you’ll need to get mortgage loan insurance. This insurance is a protection for the lender in case you fail to make mortgage payments over time. 

The mortgage loan insurance monthly fee is called a premium. Your premium will represent a non-negligible part of your monthly mortgage payment and therefore should be calculated accordingly to make sure you can still afford that mortgage.

The bigger your down payment, the lower your premium for the mortgage loan insurance. Premiums range between 0.6% up to 4.5% of your overall mortgage.

Mortgage Loan Insurance Cost & Impact on Mortgage Rates

Mortgage loan insurance costs and interest rates are intrinsically linked. As we saw earlier, if you’re able to provide a higher down payment, your lender will be able to offer you a better interest rate for your mortgage and you won’t need to get mortgage loan insurance.

The cost of the mortgage loan insurance can also impact the interest rate you are offered by the lender. If the lender perceives you as a high-risk borrower because of a lower down payment and the requirement for mortgage loan insurance, they may charge you a higher interest rate.

Mortgage payment plans aren’t meant to be one-size-fits-all.

Chat with a nesto mortgage expert & get a mortgage payment fit to you.

How Your Down Payment Impacts the Total Cost of Your Mortgage

The down payment is a crucial factor to consider when buying a home, as it affects the total cost of the mortgage.

A larger down payment means a smaller mortgage and less interest paid over the loan’s life, while a smaller down payment means a larger mortgage and more interest paid. Mortgage loan insurance is also an important factor to consider when the down payment is less than 20% of the home’s value.  While a larger down payment can save money in the long run, personal financial situations and goals should be considered when deciding how much to put down.

Strategies for Saving Enough Money for a Down Payment

It may feel overwhelming to save money for a down payment, but it’s possible if you plan and budget carefully. Let’s look at some of the ways to help you get there. 

Budgeting tips to help save up money

1- Set a goal for a down payment: Decide how much you want to put down on your future home. Don’t forget to take into account the mortgage loan insurance if you’re planning on having a down payment that represents less than 20% of the value of the house or if you’re self-employed.

2- Have a close look at your current financial situation and create a budget and savings plan: Take into consideration your income, expenses and existing debts. Start saving as early as possible and make sure you are saving in the right places.

3- Explore government programs and incentives: Look into government programs and incentives that can help you save for a down payment, such as the Home Buyers’ Plan or First-Time Home Buyer Incentive.

4- Explore ways to decrease your debt: Paying off your debts will obviously send more money into your savings account, but it will also reduce your debt service ratio, making you a better candidate for a mortgage loan.

5- Don’t be discouraged by the process. Saving for a down payment takes time and discipline, but with a solid plan and commitment, you can make it happen.

Researching government incentives or programs that could help with the costs

Explore the various programs, plans, and incentives that are accessible to you before purchasing a home.

Home Buyer’s Plan (HPB)

If you’re a first-time homebuyer looking for down payment funds, consider borrowing (tax- and interest-free) from your registered retirement savings plans (RRSPs) under the Home Buyers’ Plan (HBP).

With the HBP, you can withdraw up to $35,000 from your RRSP ($70,000 for couples) tax-free and interest-free to use as a down payment. To be eligible, the funds must be in your RRSP account for at least 90 days prior to withdrawal. You’ll need to repay the loan over 15 years, with annual payments of one 15th of the total amount required. 

First-Time Home Buyer Incentive

The First-Time Home Buyer Incentive (FTHBI) aims to assist first-time homebuyers in reducing their mortgage costs by providing shared-equity loans of up to 5% for resale homes and 10% for newly-built homes. 

The idea behind the FTHBI is that the bigger the down payment, the lower your monthly mortgage payments, making homeownership more accessible for those who buy for the first time.

Exploring different loan options from lenders

A common mistake borrowers make is not shopping around enough for their lender. The perfect mortgage option for you is out there, but you’re never going to find it if you don’t explore all the loan options available out there.

Approaching different lenders will help you reach your home buying goals with a mortgage and down payment that you are comfortable with. 


Here are a couple of the most frequently asked questions about mortgage down payment in Canada.

Is a down payment the same as a deposit?

A down payment and a deposit are different things, although they are both part of the buying process. 

A deposit is a sum of money that is paid by the buyer to the seller to secure the purchase of the property. The deposit is paid when the offer is accepted and is kept until the closing of the sale.

On the other hand, a down payment is a portion of the purchase price that the buyer pays upfront in cash or through financing to secure a mortgage loan. The down payment is typically a percentage of the total purchase price of the property and is paid at the time of closing.

Is it better to put a larger down payment on a house?

Putting a larger down payment on a house has many advantages if you can afford it. 

First, it can lower your monthly mortgage payments, making buying your dream home more affordable. It can also reduce the amount of interest you pay over the life of the loan, which can save you money in the long run. Additionally, a larger down payment may make it easier to qualify for a mortgage or to secure more favourable terms, such as a lower interest rate. It’s definitely a wise move if you’re unsure how to do it, make sure to check all the programs available to Canadians.

Do I have to put down a 20% down payment?

The short answer: no. In Canada, you will be required to put down a minimum down payment of 5% on a home prices at $500,000 or below.

If the home is priced between $500,000 and $999,999, then you’ll begin by calculating 5% of the first $500,000, then 10% of the remaining balance.

If the home is priced at $1 million or above, the minimum down payment will be 20%.

Final Thoughts

In the end, the amount of down payment you need to purchase a home will depend on a variety of factors, such as the purchase price of the home, your personal financial situation, and the requirements of your lender. Deciding on the amount of money you want to put towards a down payment is a significant step toward achieving the goal of owning your dream home. 

You want to make sure you’re comfortable with the amount you’re putting down. Remember that with careful consideration and planning, you can make the right decision that aligns with your values and financial goals. Your new home is waiting for you, and with determination and patience, you’ll get there.

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