HomeA down payment is calculated as a percentage by taking the down payment amount and dividing it by the home price. It is important to know the difference between down payment amounts, such as the minimum down payment needed and the impact various sizes of down payments have on mortgage insurance.
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What is the minimum required down payment on a home in Canada?
The minimum down payment on a home in Canada is determined by the purchase price of the home. There are three brackets that the home price fall into when calculating the minimum down payment needed. These percentages are the minimum down payment needed as a percentage of the total purchase price.
| Purchase Price | Minimum Down Payment |
|---|---|
| $500,000 or less | 5% |
| More than $500,000 less than $1,500,000 | 5% on the first $500,000 and 10% on the amount over $500,000 |
| More than $1,500,000 | 20% |
What down payment is required for first-time homebuyers in Canada?
First-time homebuyers will also be required to make a minimum down payment based on the purchase price of the home. First-time homebuyers also use these three brackets to calculate their minimum down payment.
How much down payment is needed for a house in Ontario?
Let’s work through the down payment needed to purchase a home in Ontario. As of November 2024 the average price of a home in Ontario was $868,067 — so what would be the minimum down payment needed? From the above table we can see that the price of the average Ontario home falls within the more than $500,000 less than $1,500,000 bracket.
Therefore the minimum down payment will be 5% on the first $500,000 with 10% on the remaining purchase price above $500,000. Since the first $500,000 will require a down payment of 5% a total of $25,000 will be required on the first portion of the home price. The second portion will need a 10% down payment which will be the remaining amount above the $500,000 or ($868,067 - $500,000) * 10% = $36,807. These two amounts total $61,807. Therefore, a minimum down payment of $61,807 is required to purchase the average home in Ontario.
Here is a breakdown of the calculation:
- $500,000 * 5.00% = $25,000
- ($868,067 - $500,000) * 10.00% = $36,807
- $25,000 + $36,807 = $61,807
How your down payment impacts the mortgage default insurance you will pay
Not only will the size of your down payment impact your mortgage payment but it will also impact the amount of mortgage default insurance that you are required to pay for. The percentage of mortgage default insurance is reduced as the size of your down payment increases. When you have a mortgage with a down payment of less than 20% it is considered to be a high-ratio mortgage.
There are new rules for mortgage default insurance as of December 15, 2024 for first-time home buyers and those purchasing newly-constructed homes. These two categories of home buyers are able to extend their mortgage amortization period to 30-years. If you have a high ratio mortgage that requires mortgage insurance 20 basis points will be added to the premium if you opt for a 30-year amortization.
Mortgage default CMCH insurance rates
These are the mortage default rates that you will be required to pay if the down payment you make is below 20% of the purchase price. These are the insurance premiums for the various down payment percentages. In many cases the cost of these insurance premiums are added onto the cost of your mortgage loan. Other times the cost of the insurance premiums can be paid in a lump sum.
| Down Payment | 5% - 9.99% | 10% - 14.99% | 15% - 19.99% | 20% or more |
|---|---|---|---|---|
| Insurance Rate | 4.00% | 3.10% | 2.80% | 0.00% |
If you are a first-time homebuyer or purchasing a new construction property and wish to have an amortization period of 30-years, you will pay an additional 20 basis points on your mortgage insurance. These are the default insurance premiums for those who fall into this category.
| Down Payment | 5% - 9.99% | 10% - 14.99% | 15% - 19.99% | 20% or more |
|---|---|---|---|---|
| Insurance Rate | 4.20% | 3.30% | 3.00% | 0.00% |
If you are a first-time homebuyer in Ontario and wish to purchase a home that is $500,000 with the minimum down payment. You will need a down payment of $25,000. Since this is a high-ratio mortgage with a down payment between 5% and 9.99% you will also have mortgage default insurance at a premium of 4.20%.