Down Payment Rules in Canada Explained: Minimums, Sources & Tips

Buying a home in Canada starts with one critical requirement — the down payment. Understanding how much you need, where it can come from, and how to prepare can make the mortgage process smoother and more affordable.

This guide breaks down Canadian down payment rules, approved sources, and practical tips to help you buy with confidence.

What Is a Down Payment?

A down payment is the upfront amount you pay toward the purchase price of a home. The remaining balance is financed through a mortgage. In Canada, down payment requirements are regulated and vary based on the property price.

Minimum Down Payment Requirements in Canada

The minimum down payment depends on the home’s purchase price:

• Homes up to $500,000:
  Minimum 5% of the purchase price

• Homes between $500,000 and $999,999:
  5% on the first $500,000
  10% on the portion above $500,000

• Homes priced at $1 million or more:
  Minimum 20% down payment required

If your down payment is less than 20%, your mortgage will be considered high-ratio, meaning mortgage default insurance is mandatory.

Mortgage Default Insurance Explained

High-ratio mortgages require insurance from one of the following providers:

• CMHC

• Sagen

• Canada Guaranty

This insurance protects the lender, not the borrower, and the premium is typically added to your mortgage amount.

Approved Sources for Down Payments in Canada

Lenders require proof that your down payment comes from an acceptable source. Common approved options include:

Personal Savings

Money saved in your bank account for at least 90 days is the most straightforward option.

Gifted Funds

Funds gifted by immediate family members are allowed with a signed gift letter confirming repayment is not required.

RRSP Home Buyers’ Plan (HBP)

First-time buyers can withdraw up to $35,000 per person from their RRSPs, tax-free, to use toward a down payment.

Sale of an Existing Property

Equity from selling your current home can be applied toward your new purchase.

Non-Repayable Incentives

Certain government or builder incentives may be allowed, depending on lender guidelines.

What Is NOT Allowed as a Down Payment?

In most cases, lenders do not allow:

• Borrowed funds (personal loans, credit cards, payday loans)

• Unsecured lines of credit

• Cash with no paper trail

Using unapproved sources can delay or even cancel your mortgage approval.

Down Payment Tips for Canadian Homebuyers

Start Saving Early

Even small, consistent savings can grow significantly over time.

Understand Total Purchase Costs

Beyond the down payment, plan for closing costs such as legal fees, land transfer tax, inspections, and adjustments.

Get Pre-Approved First

Mortgage pre-approval helps you understand your price range and required down payment before you shop.

Work With a Mortgage Professional

A broker can help structure your down payment properly and match you with lenders that fit your financial situation.

Final Thoughts

Understanding Canada’s down payment rules can help you avoid surprises and move forward with confidence. Whether you’re a first-time buyer or upgrading your home, knowing your minimum requirements and approved funding sources is essential.

At MortgageApplyOnline.ca, we make the mortgage application process simple and transparent. Apply online today to see your options and get expert guidance every step of the way.