In Canada, buying a home requires a down payment, which is a percentage of the home's purchase price that you pay upfront. The rest is typically financed through a mortgage. Here are the key down payment options and requirements:
🔹 Minimum Down Payment Requirements
The minimum down payment depends on the purchase price of the home:
| Home Price | Minimum Down Payment |
|---|---|
| $500,000 or less | 5% of the purchase price |
| $500,000 to $999,999 | 5% of the first $500,000 + 10% of the remainder |
| $1,000,000 or more | 20% of the purchase price |
Example:
For a $750,000 home:
5% of $500,000 = $25,000
10% of $250,000 = $25,000
Total down payment = $50,000
🔹 High-Ratio Mortgage Insurance (CMHC Insurance)
If your down payment is less than 20%, you must buy mortgage default insurance through one of the approved providers (e.g., CMHC, Sagan, Canada Guaranty). This is known as a high-ratio mortgage.
Cost ranges from 2.8% to 4% of the mortgage amount.
This premium can be added to your mortgage.
🔹 Sources of Down Payment
You can fund your down payment from:
Savings – the most common source.
RRSPs (Home Buyers' Plan) – withdraw up to $60,000 tax-free if you’re a first-time buyer (repayable over 15 years).
Gifted Funds – from immediate family (must include a signed gift letter).
Borrowed Funds – some lenders allow borrowed down payments, but this affects your debt service ratios.
🔹 Programs to Help First-Time Buyers
First-Time Home Buyer Incentive (FTHBI)
Shared equity loan with the government (5% or 10%)
You repay it later when you sell or refinance.
Tax-Free First Home Savings Account (FHSA)
Save up to $8,000/year, lifetime limit of $40,000
Tax-deductible contributions and tax-free withdrawals.
Home Buyers’ Amount
Claim a non-refundable tax credit of $10,000 (i.e., up to $1,500 in tax savings).
🔹 Tips for Building Your Down Payment
Automate savings with a dedicated account.
Use cash gifts wisely.
Explore employer-assisted home buying plans, if available.
Consider combining FHSA and RRSP savings strategies.