The Basic Tiers
In Canada, the minimum down payment is 5 percent on the portion of the purchase price up to 500,000 dollars, then 10 percent on the portion between 500,000 and 1.5 million. For homes over 1.5 million, buyers need at least 20 percent down. Toronto's average home prices mean many buyers fall into that middle tier.
- 5 percent up to 500,000
- 10 percent from 500,000 to 1.5 million
- 20 percent above 1.5 million
Where the Money Can Come From
Acceptable down payment sources include personal savings, RRSP withdrawals through the Home Buyers Plan, FHSA savings, and gifted funds from immediate family. Lenders will ask for a paper trail showing the money has been in your account for a certain period, often called seasoning.
Minimum Down Payment and CMHC Insurance
If your down payment is less than 20 percent, your mortgage is considered high ratio and requires default insurance, commonly through CMHC. This insurance protects the lender, not you, and the premium is added to your mortgage balance or paid upfront.
Saving Faster in a Toronto Market
Given Toronto's price levels, many buyers combine multiple sources, such as personal savings plus a gift from parents, to reach the 20 percent mark and avoid insurance premiums. Others choose to buy with a smaller down payment to enter the market sooner.
Investment Properties Are Different
If you are buying a property you do not intend to live in, the minimum down payment is generally 20 percent regardless of price, since default insurance is not available for pure rental purchases.
Frequently asked questions
- Can I use a gift for my entire down payment?
- Yes, gifted funds from immediate family can often cover the full down payment, but a signed gift letter is required.
- Do I need 20 percent to avoid mortgage insurance?
- Yes, putting down 20 percent or more on a qualifying property means you avoid CMHC or similar default insurance.
- Does the down payment tier apply to the whole price or just the portion above 500,000?
- The higher percentage only applies to the portion of the price above each threshold, it is a blended calculation.