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. For an eligible owner-occupied property under $1.5 million, the baseline is 5% on the first $500,000 and 10% on the portion above $500,000. At $1.5 million or more, the baseline minimum is 20%.
This means a $450,000 condo requires $22,500 (5%). A $750,000 home requires $50,000. A $1.2 million home requires $95,000 under the tiered minimum, subject to mortgage-insurance, borrower, property, and lender eligibility. At $1.5 million, the baseline minimum becomes $300,000 (20%).
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.
| Purchase Price | Down Payment Formula | Example Price | Minimum Down Payment |
|---|---|---|---|
| Up to $500,000 | 5% of purchase price | $450,000 | $22,500 (5.0%) |
| $500,001 to $1,499,999 | 5% of first $500K + 10% of remainder | $1,200,000 | $95,000 (7.92%) |
| $1,500,000+ | 20% minimum (uninsured only) | $1,800,000 | $360,000 (20.0%) |
These minimums apply to owner-occupied properties with 1-3 units purchased through a federally regulated lender. Investment properties and properties with 4+ units may have different requirements.
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
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 relief. Ontario offers a provincial rebate of up to $4,000. In BC, a fully eligible transfer can receive up to an $8,000 exemption through $835,000, with the exemption phasing out from $835,000 to $860,000.
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 qualifying home, but they work differently. A qualifying FHSA withdrawal does not need to be repaid. HBP withdrawals normally create a repayment obligation, with missed required repayments included in taxable income.
Which account to use first depends on contribution room, available savings, tax position, purchase timing, and the need to preserve retirement funds. Model the actual cash and tax effects instead of assuming one sequence fits every buyer.
Timing matters. HBP rules generally require eligible RRSP contributions to remain in the RRSP for at least 90 days before withdrawal. For both programs, confirm account, agreement, occupancy, form, and withdrawal timing before relying on the funds for closing.
| Feature | FHSA | RRSP Home Buyers' Plan |
|---|---|---|
| Annual contribution limit | $8,000 | N/A (general RRSP limit: 18% of earned income) |
| Lifetime withdrawal limit | $40,000 | $60,000 |
| Tax treatment of withdrawal | Tax-free | Tax-free if repaid on schedule |
| Repayment required | No | Yes — over 15 years |
| Combined with other programs | Yes — can stack with HBP | Yes — can stack with FHSA |
| Must be first-time buyer | Yes | Yes (with some exceptions) |
Both programs define 'first-time buyer' as someone who has not owned a home in the current year or previous four calendar years.
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, while uninsured policies may differ. The required amount from the borrower's own resources varies by lender, insurer, property, and program, so confirm it before moving funds or writing an offer.
- 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.