• Minimum Down Payment Rules in Canada

The federal minimum down payment depends on the purchase price. For homes priced under $500,000, the minimum is 5%. For homes between $500,000 and $999,999, the structure is tiered: 5% on the first $500,000 and 10% on the remaining amount. For homes priced at $1,000,000 or more, the minimum is 20% with no insured mortgage option available.

• The 20% Threshold and Why It Matters

Putting down 20% or more is a meaningful milestone in Canadian mortgage rules. At 20%, you are no longer required to purchase mortgage default insurance, which eliminates an insurance premium of up to 4% of the mortgage amount added to your loan. On a $600,000 mortgage, that is $24,000 in insurance that compounds interest over the full amortization. The 20% threshold also gives you access to conventional mortgages with different terms and greater lender flexibility.

That said, stretching to reach exactly 20% is not always the right financial decision. Arriving at closing with no emergency fund or maintenance reserve is a precarious position. Many buyers find a 10% or 15% down payment that leaves sufficient liquidity in reserve is a more financially sound choice than squeezing out every dollar to reach 20%.

• Mortgage Default Insurance Explained

When your down payment is less than 20%, federally regulated lenders are required to insure the mortgage through CMHC, Sagen, or Canada Guaranty. This insurance protects the lender — not you — against default. The premium is calculated as a percentage of the mortgage amount and ranges from 2.80% (15%–19.99% down) to 4.00% (5%–9.99% down). It is added to your mortgage balance, not paid as cash at closing, though the applicable provincial sales tax on the premium must be paid in cash on closing day.

• Where Your Down Payment Can Come From

Lenders require that down payment funds be verified as genuinely yours. Acceptable sources include personal savings and chequing accounts (held for at least 90 days), investment or RRSP accounts (documented withdrawals), proceeds from the sale of another property, and gifts from immediate family members with a signed gift letter confirming no repayment is expected. Borrowed funds — such as a personal loan or line of credit used for the down payment — are generally not permitted and must be disclosed if used, as they affect your GDS and TDS ratios.

• The RRSP Home Buyers' Plan

The Home Buyers' Plan (HBP) allows first-time buyers to withdraw up to $35,000 from their Registered Retirement Savings Plan tax-free to use toward a qualifying home purchase. Couples buying together can each withdraw $35,000, for a combined maximum of $70,000. The withdrawn amount must be repaid to the RRSP over 15 years starting two years after withdrawal — failing to repay the required annual amount means that portion is added to your taxable income for the year. The HBP is a powerful accelerator for buyers who have been diligently contributing to an RRSP.

• The First Home Savings Account

The First Home Savings Account (FHSA) is the most tax-efficient vehicle available to first-time buyers saving for a down payment. Contributions are tax-deductible (like an RRSP), growth is tax-free (like a TFSA), and qualified withdrawals for a home purchase are also tax-free — a combination not available anywhere else. The annual contribution limit is $8,000, with a lifetime limit of $40,000. Unused contribution room carries forward one year. The earlier you open and begin contributing to an FHSA, the more its benefits compound before your purchase.

• Common Down Payment Myths

Myth: You always need 20% to buy a home in Canada. The minimum is 5% for homes under $500,000. Mortgage insurance makes it possible to purchase with less.

Myth: A larger down payment always means a lower interest rate. Rates are based primarily on credit score, income, and lender, not on how much you put down — though crossing the 20% threshold may unlock access to additional lenders and products.

Myth: Gifted funds cannot be used for a down payment. Gifts from immediate family are generally acceptable to most lenders with proper documentation.

• The Bottom Line

Your down payment decision involves more than hitting a minimum. Consider how much liquidity you want to retain after closing, whether CMHC insurance is a deal-breaker for you financially, and which savings vehicles — FHSA, HBP, or both — you can use to maximize your accumulated funds. The right down payment size is the one that gets you into a home you can afford while leaving you financially stable on the other side of closing day.