Minimum Down Payment in Canada
Know the minimum cash you need,
and when mortgage default insurance applies.
What Is the Minimum Down Payment in Canada?
A down payment is the amount you pay upfront toward the purchase price of a home. Your lender finances the remaining balance through your mortgage.
Deposits paid to the real estate brokerage, builder, or developer form part of your total down payment. Closing costs such as land transfer tax, legal fees, and new construction charges are separate and must be budgeted in addition to your down payment.
The minimum amount you need for your down payment also depends on the purchase price of the home. If your down payment is less than 20% of the price of your home, you’ll typically need to buy mortgage loan insurance.
Minimum Down Payment Rules:
- $500,000 or less → 5%
- $500,000 to $1.5 million → 5% + 10%
- $1.5 million+ → 20%
Example: How to calculate your minimum down payment
The calculation of the minimum down payment depends on the purchase price of the home.
If the purchase price of your home is $500,000 or less
Suppose the purchase price of your home is $400,000. You need a minimum down payment of 5% of the purchase price. The purchase price multiplied by 5% is equal to $20,000.
If the purchase price of your home is more than $500,000
Suppose the purchase price of your home is $600,000. You can calculate your minimum down payment by adding 2 amounts. The first amount is 5% of the first $500,000, which is equal to $25,000. The second amount is 10% of the remaining balance of $100,000, which is equal to $10,000. Add both amounts together which gives you a total of $35,000.
Important notes about down payment sources and lender requirements
If your down payment in Ontario is less than 20% of the purchase price, mortgage default insurance is typically required.
In Ontario, mortgage default insurance premiums are added to the mortgage balance, and Ontario provincial sales tax applies to the premium. The provincial tax must be paid upfront at closing and cannot be added to the mortgage.
Premiums typically range from 0.6% to 4.5% of the mortgage amount, depending on your down payment size.
Approved Mortgage Default Insurers in Ontario
CMHC
Government Backed Insurer
-
Crown corporation
- Backed by Government of Canada
-
Insures high ratio mortgages
-
Sets national underwriting standards
Sagen
Private Mortgage Insurer
- Private insurer
-
Competes with CMHC
- Standard and alternative programs
-
Used by major Canadian lenders
Canada Guaranty
Private Mortgage Insurer
-
Canadian owned private insurer
-
Competes nationally
-
Flexible underwriting programs
-
Available through most lenders
Ontario follows federal mortgage qualification rules for minimum down payment requirements:
- 5% on purchase prices up to $500,000
- 5% on the first $500,000 plus 10% on the portion between $500,000 and $1,499,999.99
- 20% required at $1,500,000 and above
Homes priced at $1,000,000 or more are not eligible for mortgage default insurance under current federal rules.
FAQ
Frequently Asked Questions About Minimum Down Payments in Ontario
In Ontario, the minimum down payment depends on the purchase price of the home.
- 5% on homes up to $500,000
- 5% on the first $500,000 plus 10% on the portion between $500,000 and $1,499,999.99
- 20% on homes priced at $1,500,000 or more
These rules are set federally and apply across all of Ontario.
First time home buyers in Ontario must follow the same minimum down payment rules as all other buyers. There is no reduced minimum down payment simply because you are a first time buyer.
The standard rules apply:
• 5% on homes up to $500,000
• 5% on the first $500,000 plus 10% on the portion between $500,000 and $1,499,999.99
• 20% on homes priced at $1,500,000 or more
However, first time home buyers may qualify for land transfer tax rebates that reduce closing costs.
In Ontario, there are two types of land transfer tax that may apply:
- Provincial Land Transfer Tax
- Municipal Land Transfer Tax in certain cities
Provincial Land Transfer Tax Rebate:
First time buyers may receive a provincial rebate of up to $4,000. There are no additional administrative fees attached to the provincial rebate.
Toronto Municipal Land Transfer Tax:
If you purchase in Toronto, you pay both the provincial tax and a municipal land transfer tax.
Toronto offers its own first time buyer rebate of up to $4,750. The municipal tax is an additional layer applied on top of the provincial tax and is designed to generate municipal revenue.
Important:
Land transfer taxes and related municipal charges do not count toward your down payment. They are separate closing costs and must be budgeted in addition to your minimum down payment.
No. Ontario land transfer tax is separate from your down payment. It is paid at closing and cannot be used as part of the minimum down payment requirement. Buyers must budget for both the down payment and closing costs.
However, first time home buyers may qualify for land transfer tax rebates that reduce closing costs.
In Ontario, there are two types of land transfer tax that may apply:
- Provincial Land Transfer Tax
- Municipal Land Transfer Tax in certain cities
Provincial Land Transfer Tax Rebate:
First time buyers may receive a provincial rebate of up to $4,000. There are no additional administrative fees attached to the provincial rebate.
Toronto Municipal Land Transfer Tax:
If you purchase in Toronto, you pay both the provincial tax and a municipal land transfer tax.
Toronto offers its own first time buyer rebate of up to $4,750. The municipal tax is an additional layer applied on top of the provincial tax and is designed to generate municipal revenue.
Important:
Land transfer taxes and related municipal charges do not count toward your down payment. They are separate closing costs and must be budgeted in addition to your minimum down payment.
No. Ontario land transfer tax is separate from your down payment. It is paid at closing and cannot be used as part of the minimum down payment requirement. Buyers must budget for both the down payment and closing costs.
However, first time home buyers may qualify for land transfer tax rebates that reduce closing costs.
In Ontario, there are two types of land transfer tax that may apply:
- Provincial Land Transfer Tax
- Municipal Land Transfer Tax in certain cities
Provincial Land Transfer Tax Rebate:
First time buyers may receive a provincial rebate of up to $4,000. There are no additional administrative fees attached to the provincial rebate.
Toronto Municipal Land Transfer Tax:
If you purchase in Toronto, you pay both the provincial tax and a municipal land transfer tax.
Toronto offers its own first time buyer rebate of up to $4,750. The municipal tax is an additional layer applied on top of the provincial tax and is designed to generate municipal revenue.
Important:
Land transfer taxes and related municipal charges do not count toward your down payment. They are separate closing costs and must be budgeted in addition to your minimum down payment.
No. Closing costs such as legal fees, land transfer tax, title insurance, and adjustments are separate from the down payment. Lenders require that the minimum down payment be applied directly toward the purchase price of the property.
Important:
Land transfer taxes and related municipal charges do not count toward your down payment. They are separate closing costs and must be budgeted in addition to your minimum down payment.
Yes. Many lenders allow gifted funds from immediate family members to be used as a down payment. The gift must typically be documented with a signed gift letter confirming the funds do not need to be repaid. This will be completed with your mortgage agent or broker using a form provided by the lender.
Yes. If your down payment is less than 20% of the purchase price, mortgage default insurance is generally required. The insurance protects the lender, not the borrower, and the premium is usually added to the mortgage balance.
To avoid mortgage default insurance, you must put at least 20% down. Homes priced at $1,000,000 or more are not eligible for mortgage default insurance under current federal guidelines and therefore require a minimum 20% down payment.
Mortgage default insurance premiums typically range from 0.6% to 4.5% of the mortgage amount. The exact premium depends on the size of your down payment. A larger down payment reduces the insurance premium percentage.
For owner occupied homes, mortgage default insurance premiums are not tax deductible. However, in some rental or investment property situations, certain mortgage related expenses may be deductible. You should consult a qualified tax professional for advice.
In most cases, lenders require the minimum down payment to come from your own verified resources or from an approved gift from an immediate family member.
Borrowed down payments are generally restricted and can significantly affect your mortgage qualification amounts.
However, some lenders and programs may allow structured borrowed funds, but:
- The source must be clearly documented
- The repayment terms must be disclosed
- The repayment obligation must be included in your debt ratios
- The program must specifically permit borrowed funds
If the borrowed funds create additional monthly payments, those payments are included in your Gross Debt Servicing (GDS) and Total Debt Servicing (TDS) calculations.
This directly affects how much you could qualify for.
Lenders qualify you using two key debt servicing ratios.
GDS, Gross Debt Servicing Ratio
This measures the percentage of your gross monthly income used to cover housing costs.
Housing costs include:
- Mortgage principal and interest
- Property taxes
- Heating costs
- 50% of condo fees, if applicable
Most insured and A lenders must keep GDS at or below 39%.
TDS, Total Debt Servicing Ratio
This measures the percentage of your gross monthly income used to cover all debt obligations.
This includes:
- All housing costs
- Credit cards
- Car loans
- Lines of credit
- Personal loans
- Borrowed down payment repayment obligations
Most insured and A lenders must keep TDS at or below 44%.
Why This Matters
If you borrow your down payment and that loan requires repayment, the new monthly obligation increases your TDS ratio.
Even if the lender allows borrowed funds, your approval amount may be reduced because your debt ratios increase.
Professional Insight
If you are near 39% GDS or 44% TDS, adding even a small loan payment can reduce your maximum purchase price by tens of thousands of dollars.
This is why structure matters.
Before borrowing a down payment, you should have your ratios reviewed properly so you understand the impact on your qualification.