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Down Payments in Canada: Minimums, CMHC Insurance, and How to Get to 20%

How much do you actually need to buy a home in Canada? This guide covers minimum down payment rules, CMHC mortgage insurance premiums, and strategies to hit 20%.

Down Payments in Canada: Minimums, CMHC Insurance, and How to Get to 20%

The down payment question is more nuanced than "save as much as possible." Canadian rules set minimum thresholds by purchase price, and crossing the 20% line eliminates mandatory mortgage insurance — a significant cost. Here's the full picture.

Minimum Down Payment Rules (Federal)

| Purchase Price | Minimum Down Payment | |---------------|---------------------| | Up to $500,000 | 5% | | $500,001 – $999,999 | 5% on first $500K + 10% on remainder | | $1,000,000 and above | 20% (no insured mortgage available) |

For a $700,000 home: 5% × $500,000 + 10% × $200,000 = $25,000 + $20,000 = $45,000 minimum.

CMHC Mortgage Insurance Premiums

Any mortgage with less than 20% down requires mortgage loan insurance from CMHC, Sagen, or Canada Guaranty. The premium is added to your mortgage — not paid in cash at closing.

| Down Payment | Premium Rate | |-------------|-------------| | 5–9.99% | 4.00% | | 10–14.99% | 3.10% | | 15–19.99% | 2.80% |

On a $600,000 mortgage at 5% down, the premium is 4% × $570,000 = $22,800 — added to your loan balance and amortized over 25 years.

The 20% Threshold: Is It Worth Waiting For?

Reaching 20% eliminates the insurance premium but delays your purchase. The math depends on:

  • How fast home prices are rising in your market
  • How long it will take to accumulate the extra down payment
  • What you're paying in rent while waiting

In fast-rising markets, the cost of waiting often exceeds the insurance premium. In stable or declining markets, waiting to hit 20% can make sense.

Tax-Advantaged Ways to Build Your Down Payment

FHSA (First Home Savings Account) — Contribute up to $8,000/year ($40,000 lifetime). Contributions are tax-deductible. Withdrawals for a first home are completely tax-free.

Home Buyers' Plan (HBP) — Withdraw up to $60,000 per person ($120,000 per couple) from your RRSP. Must be repaid over 15 years or the amount is added to income.

TFSA — Not specifically for home buying, but growth and withdrawals are tax-free. Common source of down payment funds.

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