Down Payment

A down payment is the portion of a home's purchase price a buyer pays upfront, which reduces the amount that must be borrowed through a mortgage. In Canada the down payment is delivered to the seller through the buyer's lawyer or notary on the completion date, while the lender advances the balance. Its size drives the loan-to-value ratio, the type of mortgage available, and whether mortgage default insurance is required.

Why the size of your down payment matters

Lenders compare the mortgage amount to the property's value. When the down payment is below 20% of the purchase price, the mortgage is a high-ratio mortgage and must be insured against default by an approved insurer such as CMHC, Sagen, or Canada Guaranty. The insurance premium is typically added to the mortgage balance, so it increases what you owe. At 20% or more, the mortgage is conventional and insurance is generally not required.

A larger down payment also lowers the required monthly payment, reduces total interest over the amortization period, and can affect how the file looks under the federal mortgage stress test, because lenders qualify borrowers using a higher qualifying rate. It does not eliminate other costs, such as closing costs, land transfer tax, or legal fees.

Where down payment funds can come from

Savings held in a bank account, TFSA, or non-registered investments
Withdrawals under the Home Buyers' Plan from an RRSP, and contributions to a First Home Savings Account
A gift from an immediate family member, usually documented with a signed gift letter
Proceeds from selling a current home, which may require bridge financing if the closing dates do not line up

Some insured mortgages restrict using borrowed money as a down payment, so confirm the lender's and the insurer's requirements before relying on a loan or line of credit.

Minimum down payment rules

Federal rules set a minimum down payment based on the purchase price. The required percentage is tiered: a lower percentage applies up to a set price threshold, and a higher percentage applies to the portion above it. Minimums, thresholds, and insurance eligibility change over time, so confirm the current figures on the CMHC website. Even where a minimum is met, an individual lender may require more.

Frequently asked questions

How much down payment do I need to buy a house in Canada?

Federal minimums are tiered by purchase price, with a lower percentage applying to the first portion of the price and a larger percentage above a set threshold. Putting down less than 20% generally means mortgage default insurance is required. Because thresholds and eligibility change, confirm current minimums on the CMHC website and with your lender.

Can I use my RRSP for a down payment?

Yes, through the Home Buyers' Plan. Eligible first-time buyers can withdraw from an RRSP to buy or build a qualifying home without tax withheld at the time of withdrawal, then repay the amount over a set repayment period. Funds normally must sit in the RRSP for a minimum time first. Confirm current limits and conditions with the CRA.

Can my down payment be a gift from a parent?

Lenders commonly accept a gifted down payment. Expect to provide a signed gift letter stating the money is a gift rather than a loan, along with evidence the funds were transferred to you. Insurers and lenders may require the gift to come from an immediate relative, and rules vary between programs.