5 Percent Down Payment Canada Guide

The minimum down payment in Canada is 5% — but there's more to the story. Here's the real cost, the CMHC premium, and when it makes sense to put more down.

Canada's Minimum Down Payment Rules

The federal government sets minimum down payment requirements based on the purchase price of the property:

• Homes under $500,000: minimum 5% down
• Homes $500,000–$999,999: 5% on the first $500K + 10% on the portion above $500K
• Homes $1,000,000 and above: minimum 20% down (no mortgage insurance available)

These rules apply to owner-occupied principal residences. Investment properties and rental properties have different, higher requirements.

The True Cost: CMHC Mortgage Insurance

Any mortgage with less than 20% down must be insured through CMHC, Sagen, or Canada Guaranty. The insurance premium is added directly to your mortgage and paid over the life of the loan. Here are the current CMHC premium rates:

Down Payment	Loan-to-Value	CMHC Premium
5%	95%	4.00% of mortgage
10%	90%	3.10% of mortgage
15%	85%	2.80% of mortgage
20%+	80% or less	0% (no insurance required)

Real Dollar Example: $500,000 Home with 5% Down

Let's look at the actual numbers for a $500,000 home purchased with the minimum 5% down:

• Purchase price: $500,000
• Down payment (5%): $25,000
• Mortgage amount: $475,000
• CMHC premium (4.00%): $19,000
• Total insured mortgage: $494,000
• PST on CMHC premium (Ontario/Quebec): ~$1,520–$1,900 paid at closing

With a 5-year fixed rate of 4.5% over 25 years, your monthly payment on $494,000 is approximately $2,720. With 10% down, the mortgage is $450,000 + $13,950 insurance = $463,950, and the monthly payment drops to approximately $2,553 — saving $167 per month.

Benefits of a 5% Down Payment

Entering the market sooner is often the right call, especially in appreciating markets. Consider:

• You begin building equity immediately rather than continuing to rent
• You lock in a purchase price before further appreciation
• Your savings can remain in tax-advantaged accounts (FHSA, RRSP) rather than being fully deployed as down payment
• The CMHC premium, though significant, is spread over 25 years and is relatively small on a per-month basis
• First-time buyers of new construction homes now qualify for 30-year amortization on insured mortgages (as of August 2024), reducing the monthly payment further

When to Wait and Save More

A larger down payment makes sense when:

• You are close to the 10% or 20% threshold (the insurance premium drops significantly)
• You are buying in a market with flat or declining prices where immediate entry is less critical
• Higher mortgage payments would strain your budget and create financial stress
• You expect significant income changes or job instability in the near term

The 30-Year Amortization Advantage for FTHB

As of August 2024, first-time buyers purchasing new construction homes with insured mortgages (less than 20% down) can amortize over 30 years instead of the standard 25. On a $494,000 mortgage at 4.5%, extending from 25 to 30 years reduces the monthly payment from approximately $2,720 to $2,498 — saving $222 per month at the cost of more total interest paid over the life of the mortgage.

Sources of Your 5% Down Payment

Your down payment can come from multiple sources:

• Personal savings (savings accounts, GICs)
• FHSA withdrawals (tax-free, no repayment)
• RRSP Home Buyer's Plan (up to $60,000, repaid over 15 years)
• TFSA withdrawals
• A gift from an immediate family member (lenders require a gift letter confirming it is not a loan)
• Sale of other assets

Borrowed down payments (personal loans, lines of credit) are generally not acceptable to lenders and are prohibited for insured mortgages.