Canada's tiered down payment minimums — how they work
Canada does not have a single down payment percentage. The minimum depends on the purchase price of the home, and the rules are set federally. For owner-occupied properties with fewer than four units, the tiers are: 5% on the first $500,000 of the purchase price, 10% on the portion between $500,001 and $999,999, and 20% on any amount at or above $1,000,000.
This means a $450,000 condo requires a minimum down payment of $22,500 (5%). A $750,000 home requires 5% on the first $500,000 ($25,000) plus 10% on the remaining $250,000 ($25,000), for a total of $50,000 — or about 6.67% of the purchase price. At $1,200,000, the entire purchase price requires 20% down: $240,000.
These minimums are set by the Department of Finance and enforced by mortgage insurers and OSFI-regulated lenders. Borrowers can always put down more than the minimum — and larger down payments reduce or eliminate mortgage insurance premiums and improve stress-tested qualification ratios.
The difference between 5% and 20% down on a $750,000 home is $100,000 — but the lower down payment comes with a $19,920 insurance premium.
Where your down payment can come from — acceptable sources
Lenders require proof that your down payment comes from legitimate, traceable sources. The most straightforward source is personal savings accumulated over time — bank statements showing gradual growth are ideal. But many Canadian buyers use a combination of sources.
Gifted funds from immediate family members (parents, grandparents, siblings) are widely accepted for both insured and uninsured mortgages. The donor must provide a signed gift letter confirming the funds do not need to be repaid. Some lenders also accept gifts from extended family with additional documentation.
The Home Buyers' Plan (HBP) allows first-time buyers to withdraw up to $60,000 from their RRSP tax-free, which must be repaid over 15 years. The First Home Savings Account (FHSA) offers up to $8,000 per year in tax-deductible contributions with tax-free withdrawals for a home purchase — and unlike the HBP, FHSA withdrawals do not need to be repaid.
- Personal savings (bank statements showing 90-day history)
- Gifted funds from immediate family (gift letter required)
- FHSA withdrawals (tax-free, no repayment required)
- RRSP Home Buyers' Plan (up to $60,000, repayable over 15 years)
- Proceeds from sale of an existing property
- Borrowed funds generally NOT accepted for insured mortgages
Many buyers combine personal savings, FHSA contributions, RRSP withdrawals, and family gifts to reach their down payment target.
Down payment is only part of your cash-to-close — what else you need
Buyers often focus exclusively on the down payment and are surprised by closing costs. Total cash-to-close includes the down payment plus land transfer tax, legal fees, title insurance, home inspection, appraisal, property tax adjustments, and moving expenses.
Land transfer tax is the largest variable — in Ontario, it can reach 2.5% of the purchase price. In Toronto, a municipal land transfer tax adds another 2.5%. A $750,000 home in Toronto could trigger approximately $29,000 in combined land transfer taxes alone. Other provinces have different rates: BC charges 1% on the first $200,000, 2% on $200K-$2M, and 3% above $2M.
First-time buyers may qualify for land transfer tax rebates. Ontario offers a rebate of up to $4,000. BC offers a full exemption on properties up to $500,000 with a partial exemption phasing out at $525,000. These rebates can significantly reduce the cash needed at closing.
How your down payment interacts with mortgage qualification
Your down payment size affects qualification in two important ways beyond the insurance premium. First, a larger down payment means a smaller mortgage amount, which directly reduces the monthly payment used in both the GDS and TDS ratio calculations. Second, reaching the 20% threshold eliminates mortgage insurance, which removes one cost from the qualification calculation.
The stress test amplifies the effect of a larger down payment. Because the qualifying payment is calculated at 5.25% (or contract rate plus 2%), a $50,000 reduction in mortgage principal reduces your stressed monthly payment by approximately $300. This can mean the difference between qualifying for the home you want and needing to adjust your budget.
For borrowers close to qualification limits, increasing the down payment from 5% to 10% is one of the most efficient levers. It simultaneously lowers the mortgage amount, reduces the insurance premium, and improves both debt-service ratios — often unlocking an additional $60,000 to $80,000 in purchase capacity.
FHSA vs RRSP Home Buyers' Plan — which program to use first
The FHSA and HBP can be used together for the same home purchase, but they work differently. The FHSA is strictly better from a tax perspective because withdrawals are tax-free and do not need to be repaid. The HBP is a loan from your RRSP — you must repay the withdrawn amount over 15 years, or the unpaid portion is added to your taxable income each year.
The optimal strategy for first-time buyers is to max out FHSA contributions first (up to $8,000 per year, $40,000 lifetime cap). The contributions are tax-deductible, and all growth and withdrawals for a qualifying home purchase are tax-free. After maximizing the FHSA, the HBP becomes the next-best source of tax-advantaged down payment funds.
Timing matters. FHSA funds must be in the account for at least 30 days before withdrawal in some cases. HBP funds must be in your RRSP for at least 90 days before withdrawal. Plan your contributions at least three months ahead of your purchase timeline.
Combining FHSA and HBP can provide up to $100,000 in tax-advantaged down payment funds for first-time buyers.
Gifted down payments — documentation and lender expectations
Gifted down payments are common in Canada, particularly for first-time buyers receiving help from parents. To satisfy lender requirements, the donor must provide a signed gift letter that confirms the funds are a gift, not a loan, and that there is no expectation of repayment.
The gift letter should include the donor's name and relationship to the borrower, the gift amount, a statement that no repayment is required, and both signatures. Most lenders also require a 90-day paper trail showing the funds moving from the donor's account to the borrower's account. Cash gifts without a paper trail are generally not accepted.
Some lenders allow gifted down payments for insured mortgages only from immediate family. Uninsured mortgages may have more flexible gift policies. For the full 20% down payment on properties over $1M, lenders typically require at least 5% of the purchase price to come from the borrower's own resources — not gifts.
- Gift from immediate family: parent, grandparent, sibling (widely accepted)
- Gift letter must state: amount, relationship, no repayment required, signed by donor
- 90-day paper trail from donor account to borrower account required
- Cash gifts without documentation generally not accepted
- Properties over $1M: typically require at least 5% from borrower's own funds
Building an efficient down payment strategy — what to prioritize
The most effective down payment strategy depends on your timeline. If you have 12 months or more, prioritize FHSA contributions for the tax deduction, then RRSP contributions if you have contribution room, and finally non-registered savings. If you have 3-6 months, focus on consolidating funds, getting gift letters signed, and ensuring your paper trail is clean.
One common mistake is depleting all savings for the down payment and having nothing left for closing costs, emergency funds, or post-purchase expenses. A more resilient approach is to target a down payment that leaves at least 1.5% of the purchase price in reserve for closing costs, plus a 3-6 month emergency fund.
For borrowers who can reach the 20% threshold, the trade-off between insured and uninsured is worth modeling carefully. An insured mortgage with 15% down may offer a lower interest rate (lenders price insured mortgages more aggressively) than an uninsured mortgage with 20% down. The total cost of borrowing — including the insurance premium — should be calculated before deciding.
Frequently asked questions
What is the minimum down payment in Canada for 2026?
The minimum down payment is 5% on the first $500,000 of the purchase price, 10% on the portion from $500,001 to $999,999, and 20% on any purchase price of $1 million or more. For example, a $750,000 home requires $50,000 down (5% of $500K = $25,000 + 10% of $250K = $25,000). These minimums are federally mandated and apply to owner-occupied properties.
How does the FHSA work for a down payment in Canada?
The First Home Savings Account (FHSA) allows first-time buyers to contribute up to $8,000 per year (lifetime maximum $40,000) with tax-deductible contributions. Withdrawals for a qualifying home purchase are completely tax-free — including all investment growth — and unlike the RRSP Home Buyers' Plan, FHSA withdrawals do not need to be repaid. FHSA and HBP can be combined for the same home purchase.
Can I use a gifted down payment for my mortgage?
Yes, gifted down payments from immediate family (parents, grandparents, siblings) are widely accepted by Canadian lenders. The donor must provide a signed gift letter confirming the funds are a gift with no repayment expected. A 90-day paper trail showing the funds moving from the donor's account is also required. For properties over $1 million, lenders typically require at least 5% of the purchase price from the borrower's own resources.
How much do I need for closing costs beyond the down payment?
Closing costs typically range from 1.5% to 4% of the purchase price depending on your province. Key costs include land transfer tax (varies by province — Ontario can reach 2.5%, Toronto adds another 2.5%), legal fees ($1,500-$3,000), title insurance ($300-$500), home inspection ($400-$600), appraisal ($300-$500), and property tax adjustments. First-time buyers may qualify for land transfer tax rebates.
What is the difference between the FHSA and the RRSP Home Buyers' Plan?
The FHSA is a dedicated first-home savings account where contributions are tax-deductible and withdrawals are tax-free, with no repayment required. The HBP lets you borrow up to $60,000 from your RRSP tax-free for a home purchase, but you must repay the withdrawn amount over 15 years or the unpaid portion is added to your taxable income. The FHSA has a $40,000 lifetime cap versus $60,000 for the HBP. You can use both programs together.
Does a larger down payment help me qualify for a bigger mortgage?
Yes, in two ways. First, a larger down payment reduces the mortgage amount, which lowers the monthly payment used in debt-service calculations. Second, if your down payment reaches 20%, you avoid mortgage insurance entirely, removing that cost from qualification. Under the stress test, a $50,000 larger down payment can increase your maximum purchase price by approximately $60,000 to $80,000 depending on income and interest rates.
What is the CMHC mortgage insurance premium for a 5% down payment?
For a purchase price up to $500,000 with 5% down (95% LTV), the CMHC premium is 4.0% of the mortgage amount. On a $475,000 mortgage, this is a $19,000 premium. The premium is typically added to your mortgage balance, which means you pay interest on the premium over the life of the loan. At 10% down (90% LTV), the premium drops to 3.1%, and at 15% down (85% LTV), it drops to 2.8%.
Can I use money from my corporation for a down payment?
Using corporate funds for a personal down payment is complex and requires careful tax planning. Withdrawing funds as a salary or dividend triggers personal income tax. Some lenders may accept corporate funds as a down payment source with proper documentation and an accountant's letter. This is an area where working with both a mortgage broker and a tax professional is essential — the structure of the withdrawal affects your qualification income and tax liability.
Turn this guide into a mortgage plan
Run the numbers on your down payment scenario, or book a 45-minute consult with a Pragmatic Mortgage broker who can model your exact purchase budget.
