About Down Payment

A down payment is the amount of money that you pay at the time of purchase toward the price of your home. Your mortgage loan covers the rest.

Down payment is the amount of money that you pay at the time of purchase toward the price of your home. Your mortgage loan covers the rest. You should have a good idea of how much you can put toward the down payment before talking to a potential lender or mortgage broker.

House image on top of a stack of money

When you are at the stage of being ready to make an offer to buy a home, you will need to provide the seller with a deposit. The deposit forms part of your down payment, with the rest to be paid when you “close” the purchase of your new home.

When buying a home in Canada, the minimum down payment is at least 5% of the purchase price. For example, to buy a home that costs $250,000, you will need a minimum of $12,500 as your down payment.

In some cases, the minimum down payment may be higher than 5%. For example, if you are self-employed or have a poor credit history, you may be required to provide a higher down payment.

Tip

Save as much as you can for your down payment. A larger down payment means you need a smaller mortgage, which will save you thousands of dollars in interest charges.

If your down payment is less than 20%, you will have to purchase mortgage default insurance, which could add thousands of dollars to your costs over the life of your mortgage. For more information on mortgage default insurance, see the section called Mortgage Default Insurance.

Example

The following table shows how the size of your down payment affects the total costs to borrow for a mortgage.
 
Assumptions:
  • Interest rate: 5% (constant for entire amortization period)
  • Purchase price of home: $250,000
  • Amortization period: 25 years
  • Payment frequency: Monthly
  • Note: Any mortgage default insurance premiums have been added to the mortgage loan
Down paymentDown payment amountMortgage loan requiredMortgage default insurance premiumTotal mortgage cost (principal and interest) after 25 years
5% $12,500 $244,031 $6,531 $425,789
10% $25,000 $229,500 $4,500 $400,435
20% $50,000 $200,000 Not required $348,963

Normally, the minimum down payment must come from your own funds.

You may be eligible for other loans to help you come up with the down payment. However, it is always better to avoid taking on more debt for a down payment. For example, you may be able to use funds from your Registered Retirement Savings Plan (RRSP) for your down payment with the Home Buyers’ Plan (HBP) or check out this blog article on other down payment options.

    
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