HomeMany homebuyers want to know how much down payment is needed to purchase a home in Canada. It is possible to purchase a home in Canada with as little as a 5% down payment. While the minimum down payment is an attractive option, you may be required to provide a larger down payment based on factors such as credit score and mortgage affordability.
Minimum down payment requirements
If the purchase price of your home is $500,000 or less, you will be required to provide a down payment of at least 5%. If the purchase price is more than $500,000 but less than $1,000,000 you will need a 10% down payment on the portion above $500,000 in addition to the 5% on the first $500,000 of the purchase price. If the purchase price of your home is $1,000,000 or more you will be required to provide a 20% minimum down payment on the full purchase price. If you provide less than 20% down payment on your home purchase price, you will be required to purchase mortgage default insurance.
Canada minimum down payment chart
| Purchase Price | Minimum Down Payment Required |
|---|---|
| $500,000 or less | 5% of purchase price |
| more than $500,000 less than $1,000,000 | 5% of the purchase price for the first $500,000; 10% for the portion above $500,000 |
| $1,000,000 or more | 20% of the purchase price |
What is mortgage default insurance
Mortgage default insurance is typically required on the purchase of a home in Canada when the down payment is less than 20% of the purchase price. Mortgage default insurance may still be required when making a down payment above the minimum amount to help secure a more favorable mortgage rate – it may be necessary in cases of poor credit or self-employment. The purpose of mortgage default insurance is to protect the mortgage lender in the case that you are unable to make your mortgage payments.
The cost of mortgage default insurance premiums range from 0.6% to 4.5% of the mortgage amount. A larger down payment will decrease the mortgage default insurance premium. The cost of the mortgage default insurance premium can be paid upfront when the home is purchased or added onto the total cost of the mortgage and paid off over the course of the amortization period. For provinces that charge provincial sales tax on the mortgage default insurance, the sales tax must be paid when you get the mortgage.
Learn more:a Mortgage default (CMHC) Insurance
Average down payment on a house in Canada
We can see how much down payment is needed on the average home in Canada. The average home price in Canada was $699,117 as of May 2024. If you were to put down the minimum down payment it would be $44,862. Let’s break down this calculation. The first $500,000 of the purchase price requires a minimum 5% down payment or $25,000. The remaining $199,117 of the purchase price above $500,000 requires a 10% down payment or $19,911.70. Combining these amounts the minimum down payment on the average home in Canada is $44,911.70 or 6.42% of the purchase price.
How the down payment affects how much your mortgage will cost
A larger down payment can help increase your chances of being approved for a mortgage. It will also decrease your monthly mortgage payments, which in turn will decrease the amount of interest you will pay over the life of the mortgage. A down payment of 20% or more will also allow you to purchase a home without mortgage default insurance which will reduce your monthly mortgage payments and total mortgage cost.
Let’s look at an example to see the impact of down payment sizes on mortgage costs. This will help you see how much down payment you should make when purchasing a home in Canada. Let’s say you purchase a home in Canada for $700,000. At an interest rate of 5% over a 25 year amortization period.
| Down Payment | Minimum | 20% |
|---|---|---|
| Down Payment Amount | $45,000 | $140,000 |
| Mortgage Default Insurance | $26,200 | $0 |
| Total Mortgage | $681,200 | $560,000 |
| Total Interest Paid | $507,368 | $417,096 |
| Total Cost | $1,188,568 | $977,096 |
With a minimum down payment your monthly mortgage payment would be $3,962 compared to $3,257 if a 20% down payment was made on the purchase price of the home. Not only would the mortgage payment be more affordable with a larger down payment, you would also pay less in interest over the amortization period of the mortgage. The total cost of the home would be $977,096 when a larger down payment is made compared to $1,188,568 with a minimum down payment.