Alex Mortgages

Mortgage Agent Level 2

Learn about minimum down payments in Canada for real estate 2024


Ever dreamt of buying a house in Canada? Congratulations! This is a significant step towards building your wealth and creating a stable home environment. But before you dive headfirst into house hunting, it’s crucial to understand the financial requirements involved. One of the most important aspects to consider is the down payment.

This article will serve as your one-stop guide to understanding minimum down payments for real estate in Canada for 2024. We’ll break down the essential details in a clear and concise manner, using simple language and avoiding complex jargon. So, whether you’re a first-time homebuyer or looking to upgrade your current property, this guide will equip you with the knowledge you need to make informed decisions about down payments.

Alex Plantinga

Mortgage Agent Level 2
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Understanding Down Payments

A down payment refers to a portion of the total purchase price of a property that you pay upfront when buying a home. It represents your initial investment in the property and demonstrates your financial commitment to the lender. In Canada, the minimum down payments required varies depending on the purchase price of the house.

Down Payments Requirements in Canada


The minimum down payments for real estate in Canada is set by the government and regulated by the Financial Consumer Agency of Canada (FCAC). Here’s a breakdown of the minimum down payment requirements, as outlined in the Financial Consumer Agency of Canada website

Down Payments for Properties Under $500,000

● If the purchase price of your home is less than $500,000, then the minimum down payment is 5% of the purchase price.

For instance, if you’re buying a house for $400,000, the minimum down payment you would need to make is $20,000 (5% of $400,000).

Down Payments for Properties Over $500,000

● If the purchase price of your home is more than $500,000, the calculation becomes slightly more complex:

○ You’ll need to pay a minimum of 5% for the first $500,000 of the purchase price.

○ For the portion of the purchase price that exceeds $500,000, you’ll need to pay a minimum of 10%.

Let’s illustrate this with an example. Imagine you’re buying a house for $600,000. Here’s how to calculate the minimum down payment:

● Minimum down payments for the first $500,000 = 5% of $500,000 = $25,000

● Minimum down payments for the portion exceeding $500,000 ( $600,000 – $500,000 = $10

Factors Affecting Your Down Payments


The minimum down payments serves as a baseline, but several factors can influence the amount you ultimately decide to put towards your home purchase. Here’s a closer look at some key considerations:

Type of Property

Single-Family Home: This is the most common property type in Canada, and the minimum down payments requirement apply as outlined above.

Condominium: Condominiums may have additional fees associated with ownership, such as condo fees. These fees can sometimes be factored into the mortgage qualification process, potentially allowing you to put down a smaller down payment (be sure to confirm this with your lender). However, some lenders may still require a higher down payment for condos compared to single-family homes.

Duplex, Triplex, or Fourplex: These multi-unit residential properties may have different down payment requirements compared to single-family homes. For example, some lenders may require a higher minimum down payment, such as 20%, to reflect the investment nature of these properties.


Competitive Housing Markets: In areas with high housing demand and limited supply, like major cities, you may need to save a larger down payment to be competitive with other buyers. A larger down payment demonstrates a stronger financial position and can give you an edge in bidding wars.

Less Competitive Markets: In areas with a more balanced housing market, the minimum down payment may be sufficient to secure a mortgage.

Your Credit Score

Strong Credit Score (Generally above 720): A strong credit score indicates a history of responsible borrowing and repayment. This can lead to better mortgage interest rates and potentially allow you to qualify for a lower minimum down payments in some cases.

Lower Credit Score (Generally below 660): A lower credit score may result in higher mortgage interest rates and potentially stricter down payment requirements from lenders. You may need to save a larger down payments to offset the perceived risk associated with your credit history.

Mortgage Type

Conventional Mortgage: This is the most common type of mortgage in Canada and follows the minimum down payment requirements outlined earlier. These mortgages are typically offered by banks and trust companies.

High-Ratio Mortgage (CMHC/SGF Insured Mortgage): If your down payment is less than 20% of the purchase price, you will need mortgage default insurance from the Canada Mortgage and Housing Corporation (CMHC) or Saskatchewan Guarantee & Mortgage Corporation (SGF) depending on your province. This insurance protects the lender in case you default on your mortgage. While you can purchase a home with a down payments as low as 5% with CMHC/SGF insurance, it’s important to note that you will also be required to pay a premium. The premium amount is a percentage of the down payment and is added to your mortgage loan amount.

Remember: While the minimum down payment allows you to enter the housing market, a larger down payment offers several advantages. We’ll explore these benefits in the next section.

Saving for Your Down Payments

Saving for a down payments can be a daunting task, but with careful planning and budgeting, it’s achievable. Here are some tips to get you started:

Setting Realistic Goals

● Consider the current housing market in your desired location and the type of property you’re interested in. Research average home prices to get a realistic idea of the down payment you’ll need to save.

● Factor in additional closing costs associated with buying a home, such as lawyer fees and property taxes.

● Be honest with yourself about your current financial situation and how much you can realistically save each month.

Budgeting and Saving Strategies

● Create a budget to track your income and expenses. Identify areas where you can cut back on spending and allocate those funds towards your down payments savings.

● Explore automatic savings options offered by your bank. This can help you stay on track with your savings goals.

● Consider taking on a side hustle to generate additional income dedicated to your down payment.

● Look for government programs that may offer first-time homebuyer incentives or down payment assistance programs.

By following these tips and diligently saving, you can accumulate the necessary funds for your down payment and achieve your dream of homeownership.

Benefits of a Larger Down Payments

While the minimum down payment allows you to enter the housing market, putting down a larger amount upfront offers several advantages. Here’s a breakdown of the key benefits:

Lower Mortgage Loan Amount

The most significant benefit of a larger down payments is a lower mortgage loan amount. This translates to:

Reduced Borrowing Costs: You’ll need to borrow less money from the lender, resulting in a lower overall loan amount. This translates to significant savings on interest payments over the life of your mortgage.

Improved Debt-to-Income Ratio: A lower mortgage loan amount improves your debt-to-income ratio (DTI). DTI is a key factor that lenders consider when assessing your ability to repay a loan. A healthy DTI ratio can open doors to better mortgage interest rates and potentially other loan opportunities in the future.

Reduced Monthly Payments

With a smaller mortgage loan amount, your monthly mortgage payments will also be lower. This frees up more of your disposable income for other financial goals, such as saving for retirement or building an emergency fund. It also provides more financial flexibility to manage unexpected expenses.

Increased Equity

Down payments represents your initial ownership stake in the property. The larger your down payment, the greater your equity position in the home from the outset. Equity refers to the difference between the market value of your home and the outstanding mortgage balance. As your home appreciates in value, your equity grows proportionately. A larger down payment allows you to build equity faster, which can be beneficial for several reasons:

Improved Financial Security: Higher equity provides a financial buffer in case of unforeseen circumstances. For example, if you need to sell your home unexpectedly, a larger equity stake ensures you’ll receive a higher return on your investment after paying off the mortgage.

Access to Lines of Credit: With significant equity in your home, you may be able to qualify for a home equity line of credit (HELOC) This is a revolving line of credit that allows you to borrow against the equity you’ve built in your home. This can be a valuable tool for financing renovations, education, or other significant expenses.

Potential for Better Mortgage Rates

Some lenders offer lower mortgage interest rates to borrowers who put down a larger down payments. This is because a larger down payment signifies a lower risk for the lender, as you have a greater financial stake in the property. Even a slight reduction in the interest rate can result in substantial savings over the life of your mortgage.

Considering a Smaller Down Payments

While a larger down payments offer a significant benefits, it’s not always feasible for everyone. Here are some factors to consider if you’re contemplating a smaller down payment:

Potential for Government Assistance Programs

The Canadian government offers various programs to assist first-time homebuyers with down payments. These programs can be particularly helpful if you’re struggling to save the minimum down payment amount. Here are a couple of examples:

First-Time Home Buyer Incentive (FTHBI): This program, offered by the Government of Canada, provides a shared equity mortgage or an interest-free loan to help first-time homebuyers purchase their first home. The eligibility requirements and the amount of assistance offered can vary depending on your income and the purchase price of the home.

Tax-Free Savings Account (TFSA): While not directly a down payment assistance program, TFSAs can be a valuable tool for saving for a down payment. Contributions to a TFSA are made with after-tax dollars, and any investment growth within the account is tax-free. This allows you to maximize your savings for a down payment.

Weighing the Pros and Cons

While a smaller down payment allows you to enter the housing market sooner, it’s important to weigh the potential drawbacks:

Higher Mortgage Loan Amount and Interest Costs: With a smaller down payment, you’ll need to borrow more money from the lender, resulting in a higher mortgage loan amount and potentially higher interest rates. This can significantly increase your overall borrowing costs over the life of your mortgage.

Private Mortgage Insurance (PMI): If your down payment is less than 20% of the purchase price, you may be required to pay private mortgage insurance (PMI) This is an additional cost on top of your regular mortgage payments that protects the lender in case of default.

Lower Equity Position: With a smaller down payment, your initial equity stake in the property will be lower. This means it will take longer to build equity and benefit from potential appreciation in the home’s value.

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