HomeHomeownership has become an elusive dream for many Canadians. Despite a recent drop in home prices, a significant number of potential buyers have given up on ever owning a home. High housing costs and challenges in saving for down payments remain major barriers. If you earn the average household income it may take a down payment of $330,000 to be able to comfortably afford the average priced home in Canada.
Average down payment on a house canada
As of May 2024 the average home price in canada was $699,117. How much down payment is required based on this average price? If we were to calculate the minimum down payment it would take a down payment of $44,912 or 6.42% of the purchase price to purchase this home in Canada. This calculation was determined with the mortgage down payment calculator here.
Applying this down payment to the purchase price of the home will leave a mortgage of $654,205. Is this home affordable to the average Canadian household? If we apply the 28/36 rule to a 25-year mortgage at fixed rate of 6.50% it would take household income of $187,801 to afford this mortgage. The average household income in Canada is $106,800 which would make this home unaffordable.
One way to increase the affordability of this home would be to make a larger down payment which in turn would lower the monthly mortgage payment. How much down payment is needed? For this home to be considered affordable to the average household income of $106,800 a down payment of $330,000 would need to be made on this home purchase price. With a $330,000 down payment the outstanding mortgage would be $369,117 which would translate to monthly payments of $2,472. This payment amount would be considered affordable on the average household income of $106,800.
How much down payment is needed in Ontario?
In provinces like Ontario where the average home price exceeds the national average, an even larger down payment is needed despite the increase in average pre-tax household income compared to the national average. The average Ontario home price is $890,634 and the average pre-tax houshold income is $114,000. It would take a $500,000 down payment at a mortgage rate of 6.5% for monthly mortgage payments to be $2,612 which would be considered affordable on the average household income.
How much do you need for a down payment on a home in Canada?
The minimum down payment for a home in Canada is based on the purchase price of the home. If the home is $500,000 or less the minimum down payment is equal to 5% of the purchase price of the home. For homes with a purchase price between $500,000 and $1,000,000 the minimum down payment is 5% on the first $500,000 and 10% on the remaining amount. When the purchase price of a home is $1,000,000 or more a minimum down payment of 20% is required on the purchase of the home. If you purchase a home with the minimum down payment you will be required to also purchase mortgage default insurance. You can see how much this will cost with this mortgage default (CMHC) insurance calculator.
Source: Statcan