Down Payments: How Much You Really Need

The minimum tiers

Canada sets minimum down payments in tiers based on the purchase price of the property. The rules are federal, so they apply the same whether you are buying in Calgary, Saskatoon, or anywhere else in the country.

• On the first $500,000 of the purchase price, the minimum is 5%.
• On the portion between $500,000 and $1,500,000, the minimum rises to 10%.
• At or above $1,500,000, you need at least 20% down — these properties are not eligible for default insurance.

In practice this means a $600,000 purchase requires $35,000 down at the minimum: 5% of the first $500,000 plus 10% of the remaining $100,000.

Why 20% is the line

Any down payment below 20% triggers the requirement for default insurance — issued by CMHC, Sagen, or Canada Guaranty. This insurance protects the lender if you default, and its cost is passed to you.

The premium scales: the smaller your down payment relative to the purchase price, the higher the premium percentage. It is almost always added to the mortgage balance rather than paid upfront, so it increases the amount you finance and the interest you pay over the life of the loan.

Where your down payment can come from

Lenders do not just ask how much you have — they trace where it came from. Not every source of funds counts, and the trail matters as much as the balance.

• Personal savings — the simplest source, but lenders typically want a 90-day history showing the funds sitting in your account, not a sudden deposit the week before.
• Gifted funds — an immediate family member can gift you the down payment, but the lender requires a signed gift letter confirming no repayment is expected. The donor usually also needs to provide proof of funds.
• RRSP — Home Buyers' Plan — you can withdraw from your RRSP for a first home purchase. The withdrawal is not taxed as long as you repay it to your RRSP over the following years according to the schedule.
• Proceeds from a sale — if you are selling a current property, the equity released counts. You will need a signed sale agreement.

Unexplained recent deposits create problems. A large sum that appears without documentation — even if it is legitimately yours — can delay or derail an approval because the lender cannot confirm its source.

The First Home Savings Account

The FHSA is a registered savings vehicle specifically for a first home purchase. Contributions are tax-deductible going in, and withdrawals for a qualifying purchase are tax-free coming out — combining the benefits of an RRSP and a TFSA for this one purpose.

If you are planning a purchase a year or more out, this is worth opening now even with small contributions. The tax deduction compounds year over year and the account can be combined with the Home Buyers' Plan for a larger total down payment from registered sources.

The real tradeoff: more down vs. cash reserves

It is tempting to put every available dollar toward the down payment to reduce the insurance premium and the monthly payment. But there are costs beyond the purchase itself that need cash: closing costs (legal fees, land title registration, property tax adjustments, and home inspection), plus a reserve for the first months of ownership when unexpected expenses tend to appear.

Draining your savings to hit a higher down payment tier — then carrying a line of credit at a higher rate to cover the shortfall — can cost more in the long run than the insurance premium you avoided. A good strategy accounts for both the down payment and what happens the day after possession.

Use the affordability calculator to model different down payment amounts against your income, and the closing costs calculator to estimate what you will need on top of the purchase price.

Related reading

• First-Time Home Buyer's Guide for Alberta — a broader walkthrough covering approval, incentives, and what to expect.