Down Payments

The minimum down payment in Canada depends on the purchase price of the home:

If the purchase price is less than $500,000, the minimum down payment is 5%.

If the purchase price is between $500,000 and $999,999, the minimum down payment is 5% of the first $500,000, and 10% of any amount over $500,000.

If the purchase price is $1,000,000 or more, the minimum down payment is 20%.

Mortgage default insurance, commonly referred to as CMHC insurance, protects the lender in the event the borrower defaults on the mortgage. It is required on all mortgages with down payments of less than 20%, which are known as high-ratio mortgages. A conventional mortgage, on the other hand, is one where the down payment is 20% or higher.

According to a recent TD Canada Trust Home Buyers Report1, 30% of homebuyers plan to or have at least a 20% down payment, the point at which mortgage default insurance is no longer required.

The amount you put down at the beginning of your mortgage shapes three important outputs over the life of the mortgage:

The home price you can afford

The size of your mortgage and monthly payment

The amount of CMHC insurance you pay

1. Your down payment influences the home price you can afford

Because the minimum down payment in Canada is 5%, this benchmark is used to determine your maximum affordability. Ignoring your income and debt levels, you can infer your maximum purchase price based on the size of your down payment. Because the minimum down payment is a sliding scale, the calculation depends on whether your down payment is more or less than $25,000.

If your down payment is $25,000 or less, your maximum home price would be: down payment amount / 5%. For example, if you have saved $25,000 for your down payment, the maximum home price you could afford would be $25,000 / 5% = $500,000.

If your down payment is $25,001 or more, the calculation is a bit more complex. You can find your maximum purchase price using: down payment amount - $25,000 / 10% + $500,000. For example, if you have saved $40,000 for your down payment, the maximum home price you could afford would be $40,000 - $25,000 = $15,000 / 10% = $150,000 + $500,000 = $650,000.

Naturally, as your affordability is also a function of your income and debt levels, you should visit our mortgage affordability calculator for a more detailed analysis.

2. Your down payment shapes the size of your mortgage and monthly payment

A larger down payment reduces the size of your mortgage, and, therefore, the monthly payment and interest you will pay over the life of your mortgage.

3. Your down payment determines the amount of CMHC insurance you pay

Your CMHC insurance premium, calculated as a percent of your mortgage amount, gets smaller as you increase your down payment.

Down Payment (% of Home Price)

5% - 9.99% - 4.00%

10% - 14.99% - 3.10%

15%-19.99% - 2.80%

20% or higher - 0.00%

There are a number of ways you can source funds for a mortgage down payment. Traditional sources include saving a fixed amount from every paycheque, selling stocks, bonds, or personal property, or reaching out to immediate family, for example.

Non-traditional sources for a down payment include borrowed funds and gifts from non-immediate family members. It is important to note, however, that when you employ non-traditional sources for your down payment, you will incur a CMHC insurance surcharge of 0.15% for down payments of 5% or less.2

An alternative way to look at the down payment is to employ the loan-to-value ratio (LTV), which describes the mortgage value in relation to the home price (mortgage value / home price). A function of the down payment percentage, it can also be calculated as (1 – down payment %).