Demystifying Down Payments: A Guide for Homebuyers in Canada

Buying a home is an exciting milestone for many Canadians, but the process can often feel overwhelming, especially when it comes to understanding down payments. A down payment is a crucial part of the home-buying process and directly impacts your mortgage, interest rates, and monthly payments. In this blog, we’ll break down the essentials of down payments in Canada, including minimum requirements, how to save, and other important factors to consider when embarking on your homeownership journey.

  1. What is a Down Payment?

A down payment is an upfront payment made by a homebuyer to secure a mortgage loan for purchasing a property. It represents a portion of the total purchase price that the buyer pays out-of-pocket, with the remaining balance being financed by the lender. The down payment not only helps reduce the risk for the lender but also decreases the amount of debt the buyer takes on and the monthly payments they’ll need to make.

  1. Minimum Down Payment Requirements in Canada

In Canada, the minimum down payment you need to make depends on the purchase price of the property:

  • For homes with a purchase price of $500,000 or less, the minimum down payment is 5%.
  • For homes with a purchase price between $500,000 and $1 million, the minimum down payment is 5% of the first $500,000, and 10% of the remaining amount.
  • For homes with a purchase price of $1 million or more, the minimum down payment is 20%.

It’s important to note that if your down payment is less than 20% of the property’s value, you’ll be required to purchase mortgage default insurance, commonly known as CMHC insurance. This insurance protects the lender in case of default and increases your overall mortgage costs.

  1. How to Save for a Down Payment

Saving for a down payment may seem daunting, but with the right strategies, you can reach your goal. Here are some tips to help you save:

  • Set a clear savings goal: Determine the amount you’ll need for your down payment and create a savings plan with achievable milestones.
  • Automate your savings: Set up automatic transfers from your chequing to a dedicated savings account to ensure consistent saving.
  • Reduce expenses: Cut back on discretionary spending, such as dining out or entertainment, and allocate those funds to your savings.
  • Use a Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP): These accounts allow you to save and invest your money tax-free, which can help accelerate your savings growth.
  1. First-Time Homebuyer Programs and Incentives

The Canadian government offers several programs and incentives to assist first-time homebuyers with their down payment. Some of these include:

  • The Home Buyers’ Plan (HBP): This program allows you to withdraw up to $35,000 from your RRSP tax-free to fund your down payment. You’ll need to repay the withdrawn amount within 15 years.
  • First-Time Home Buyer Incentive (FTHBI): This is a shared equity mortgage program that allows you to reduce your monthly mortgage payments by sharing the cost of buying a home with the Government of Canada.
  1. Other Factors to Consider

In addition to saving for a down payment, there are other costs to consider when purchasing a home, such as land transfer taxes, closing costs, and moving expenses. Be sure to budget for these additional costs to avoid any surprises during the home-buying process.


Understanding down payments and the various factors that contribute to the process is key to navigating the Canadian housing market. By learning about minimum requirements, effective saving strategies, and available government programs, you’ll be well-equipped to make informed decisions on your journey

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