What Is the Minimum Down Payment to Buy a Home in Canada?

The rule by price band

The calculation works in bands. For a price of $500,000 or less, the minimum down payment is 5% of the price. For a price above $500,000 and below $1.5 million, it is 5% of the first $500,000 plus 10% of the excess. At $1.5 million or more, it is 20%. Here is the FCAC example: for a $600,000 property, the minimum down payment is $35,000, made up of $25,000 on the first band and $10,000 on the next $100,000. The effective percentage therefore rises with the price. A lender may require more depending on the file. Run the calculation yourself at a few different prices, to see how the required amount grows when the price crosses into the next band. You will judge better whether a slightly lower price really changes the plan, and you will not be surprised if a lender asks for more than the bare minimum.

Below 20%, mortgage loan insurance

When the down payment is under 20% of the price, mortgage loan insurance is usually required. It protects the lender, not the borrower, and the premium is generally added to the loan. The premium varies with the loan-to-price ratio and the file. Request it in writing from the lender or broker rather than relying on an average. With at least 20% down, insurance is not usually required, which lowers the amount borrowed and the payment. Compare the starting down payment with the one that avoids the premium. Because the premium is usually added to the loan, it becomes part of the amount on which interest is charged. That is why testing the payment with and without it is worthwhile. The comparison shows what the premium really costs the household over time.

Where the down payment can come from

The lender usually asks for proof of the down payment, along with proof of identity and employment. Funds most often come from personal savings, a gift from a relative, a registered plan such as the FHSA or the Home Buyers' Plan, or the sale of an asset. Each source has its own rules and documents. See our article on permitted sources. Keep statements that show the path of the money, especially for a recent large deposit. An unexplained deposit can delay the file. If a relative is helping, ask early what documents the lender will want, since a gift generally needs to be clearly explained. Gathering these papers before you make an offer saves stress when a deadline is close.

Beyond the minimum: costs and a buffer

The down payment is only part of the cash needed. In Quebec, also plan for the inspection, the notary, adjustments, moving and municipal transfer duties billed after the purchase. If you pay exactly the minimum and empty your accounts, you risk financing the first repair on a line of credit or card. Keep separate pools: down payment, transaction costs and an emergency buffer. A larger down payment generally reduces the loan, but weigh its benefit against the value of an accessible reserve. In your budget, name each pool and decide in advance which one a surprise expense should come from, so that the down payment is never raided by accident.

Test scenarios before visiting

Before setting a target price, calculate the minimum down payment for several prices, then the payment under a few rates and amortizations. Use the QuebecTaux calculator, for information only, neither an approval nor a rate offer. Note the price at which the minimum changes bands, since the required percentage rises above $500,000. Then ask a lender or broker to confirm the requirements for your case: property type, use, employment situation and insurance. A preapproval helps establish a maximum amount and a rate hold, depending on the lender, but it does not guarantee final approval.

Checklist

• ✓Identify the price band that applies to the target property
• ✓Calculate the minimum down payment for several prices
• ✓Check whether the down payment is under 20%
• ✓Request the mortgage insurance cost in writing
• ✓Identify the source of every dollar of the down payment
• ✓Keep statements documenting where the funds came from
• ✓Plan for inspection, notary, transfer duties and moving
• ✓Keep an emergency buffer after the purchase
• ✓Have the lender or broker confirm the requirements