Saving for a home down payment in Canada can feel overwhelming especially with rising home prices, stricter mortgage rules, and regional cost differences. But with the right plan, the path to homeownership is more achievable than most people think. Whether you're buying your first condo or upgrading to a family home, understanding how down payments work in Canada is the first step toward making a confident financial decision.
Below, you’ll find a comprehensive, easy-to-follow guide tailored specifically to Canadian buyers. From CMHC rules to first-time homebuyer incentives, this article breaks everything down in simple, practical terms.
What a Home Down Payment Means in Canada
In Canada, a home down payment is the upfront portion of the home's purchase price that you pay out of pocket. The rest is financed through a mortgage. Unlike the U.S. system, where PMI is common, Canada uses mandatory mortgage default insurance backed by organizations like:
CMHC (Canada Mortgage and Housing Corporation)
Sagen
Canada Guaranty
This insurance protects the lender, not you, but it allows Canadians with lower down payments to qualify for mortgages with reasonable interest rates.
How Down Payments Work in the Canadian Mortgage System
Canada’s rules are federally regulated, and the down payment you make directly affects your mortgage category:
Less than 20% down → “Insured mortgage”
20% or more down → “Uninsured mortgage”
The size of your down payment impacts:
Mortgage insurance requirements
Amortization limits
Interest rate options
The amount lenders allow you to borrow
Lenders also use GDS (Gross Debt Service) and TDS (Total Debt Service) ratios to determine whether your finances qualify.
Minimum Down Payment Requirements in Canada
Canada uses a tiered minimum down payment structure:
5% on the first $500,000
10% on the portion between $500,000 and $999,999
20% on properties $1 million and above
Example:
A $700,000 home requires:
5% of first $500,000 → $25,000
10% of remaining $200,000 → $20,000
Total required down payment: $45,000
This system allows more Canadians to enter the market without needing a massive upfront amount.
When 20% Down Is Mandatory
Here are the cases where 20% down is non-negotiable:
Homes priced at $1 million or more
Investment properties (rentals)
Non-owner-occupied purchases
Certain high-risk borrowers
Once you hit the 20% threshold, your mortgage becomes uninsured, which removes mortgage insurance premiums but may come with higher interest rates.
Cost of Mortgage Insurance and Its Impact
Mortgage insurance increases your total mortgage but helps buyers enter the market sooner. The premium is typically rolled into your mortgage balance, making it easier to manage.
Insurance also influences your maximum amortization period:
Insured mortgages = max 25-year amortization
Uninsured mortgages = up to 30 years
This can affect long-term interest costs significantly.
Key Factors Affecting Your Required Down Payment
Every Canadian’s down payment requirement can look different depending on several personal and financial factors. Lenders perform a full assessment before approving a mortgage, and understanding these factors puts you in a stronger position when shopping for a home.
1. Credit Score
Your credit score plays a big role in determining:
Whether lenders approve your mortgage
What interest rate you're offered
Whether the lender will require a larger down payment
In Canada, a score of 680+ is ideal for insured mortgages, while scores below that may face more restrictions.
2. GDS/TDS Ratios
Canada’s federal mortgage rules use two key ratios:
Gross Debt Service (GDS): Should be ≤ 39% of your income
Total Debt Service (TDS): Should be ≤ 44% of your income
Higher ratios may require you to increase your down payment or lower your mortgage amount.
3. Property Type
Your down payment changes based on what you buy:
Condo
Detached home
Investment property
Multi-unit building
For example, buying a 3–4 unit property may require a larger down payment and proof that rental income is reliable.
4. Purchase Price
Homes over $1 million require a full 20% down, no exceptions.
First-Time Home Buyer Incentives (Canada)
Canada offers several national programs to help first-time homebuyers reduce the cost of their home down payment.
FHSA (First Home Savings Account)
This is Canada’s newest program, allowing you to:
Contribute up to $8,000 per year
Save up to $40,000 lifetime
Benefit from tax deductions like an RRSP
Withdraw tax-free like a TFSA when buying your first home
RRSP Home Buyers’ Plan (HBP)
Canadians can withdraw up to $60,000 (as of 2025) from their RRSP:
No tax penalty
Must be repaid over 15 years
Many Canadians combine FHSA + HBP for a powerful down payment boost.
First-Time Home Buyer Incentive (FTHBI)
A shared-equity program where the federal government contributes:
5% toward resale homes
5% or 10% toward new builds
Repayment occurs when you sell the home or after 25 years.
Saving for a home down payment in Canada can feel challenging, but with the right tools, programs, and strategies, homeownership is absolutely achievable. Whether you're using an FHSA, leveraging your RRSP, or tapping into provincial assistance programs, every step adds up.
Taking the time to understand Canada’s mortgage rules empowers you to make smarter financial moves—and brings you closer to the front door of your new home.
