Minimum Down Payment in Canada: 5%, 10%, or 20%?

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The minimum down payment is one of the fundamental mortgage qualification criteria in Canada. Thresholds are set by the Office of the Superintendent of Financial Institutions (OSFI) and the Canada Mortgage and Housing Corporation (CMHC). For properties with a purchase price below $500,000, the minimum down payment is 5%. For the portion of the price between $500,000 and $999,999, the minimum rises to 10%. Any property priced at $1,000,000 or more requires a minimum down payment of 20%, and mortgage loan insurance is not available at that threshold. When the down payment is less than 20%, the borrower must obtain mortgage loan insurance from CMHC, Sagen, or Canada Guaranty. This insurance premium ranges from 2.80% to 4.00% of the loan amount depending on the loan-to-value ratio, and is typically added to the mortgage balance. In Quebec, the down payment may come from personal savings, a documented family gift with a gift letter, the Home Buyers' Plan (HBP), the FHSA (CELIAPP), or a municipal assistance program. Lenders require proof of source of funds over 90 days to combat money laundering, in compliance with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.

Minimum Down Payment in Canada: Understanding the Mandatory Thresholds

The down payment is the portion of the purchase price that the buyer contributes from their own resources when acquiring a property. In Canada, minimum down payment requirements are governed by strict fédéral rules established by OSFI and enforced by the three mortgage insurers: CMHC, Sagen, and Canada Guaranty. These thresholds are designed to protect both the financial system and borrowers by ensuring they have a sufficient financial stake in their property.

The Three Down Payment Tiers in Canada

Purchase price under $500,000: The minimum down payment is 5% of the purchase price. For example, for a $400,000 property, the minimum down payment is $20,000. The borrower must obtain mortgage loan insurance since the down payment is less than 20%.
Purchase price between $500,000 and $999,999: The minimum down payment is 5% on the first $500,000 ($25,000) plus 10% on the portion above. For a $750,000 property, the calculation is: $25,000 + $25,000 (10% of $250,000) = $50,000 minimum down payment.
Purchase price of $1,000,000 or more: The minimum down payment is 20% of the purchase price. Mortgage loan insurance is not available for properties at $1M or above, so the borrower must finance the purchase with a conventional uninsured mortgage.

Mortgage Loan Insurance: An Unavoidable Cost Below 20%

When the down payment is less than 20%, the lender requires mortgage loan insurance to protect against borrower default. The insurance premium is calculated as a percentage of the loan amount and varies by loan-to-value ratio: 4.00% for a 95% LTV (5% down), 3.10% for a 90% LTV (10% down), and 2.80% for an 85% LTV (15% down). This premium is typically added to the mortgage balance and amortized over the full amortization period.

Eligible Down Payment Sources in Quebec

Personal savings: the most common source. Lenders require 90-day bank statements showing the gradual accumulation of funds.
Family gift: accepted by most lenders provided a signed gift letter confirms no repayment is expected. The donor must also provide proof of financial capacity.
Home Buyers' Plan (HBP): allows each person to withdraw up to $60,000 from their RRSP for the purchase of a first home, without immédiate tax withholding.
FHSA (CELIAPP): the First Home Savings Account allows contributions of up to $8,000 per year (lifetime maximum of $40,000), with a tax deduction on contributions and tax-free withdrawals.
Municipal programs: some Quebec municipalities offer grants or preferential-rate loans to help first-time buyers build their down payment.

Strategically Planning Your Down Payment

The decision between putting down the minimum 5% or accumulating a 20% down payment depends on several factors: the local real estate market, your savings capacity, the cost of the mortgage insurance premium, and the opportunity cost of renting during the accumulation period. In markets where prices are rising rapidly, waiting to accumulate 20% may mean the target property's value increases faster than your savings. An AMF-certified mortgage broker can help you analyze these factors and déterminé the optimal down payment amount for your financial situation.

Frequently Asked Questions

What is the minimum down payment to buy a home in Quebec?

The minimum down payment in Quebec follows Canadian fédéral rules: 5% of the purchase price for properties under $500,000; 5% on the first $500,000 plus 10% on the portion above for properties between $500,000 and $999,999; and 20% for properties at $1,000,000 or more.

What down payment sources do lenders accept?

Lenders accept personal savings, family gifts accompanied by a gift letter confirming no repayment is required, HBP withdrawals (RRSP), the FHSA (CELIAPP), municipal or provincial homeownership assistance programs, and proceeds from the sale of an existing property. Borrowers must provide 90-day bank statements to prove the source of funds.

How much does mortgage loan insurance cost with a 5% down payment?

With a 5% down payment, the loan-to-value ratio is 95% and the mortgage loan insurance premium is 4.00% of the amount borrowed. On a $475,000 loan (a $500,000 property minus a $25,000 down payment), the premium would be $19,000, typically added to the mortgage balance.

Can I use a personal loan as a down payment?

No. Borrowed funds from a financial institution are generally not accepted as a down payment for an insured mortgage. The lender and insurer verify that the down payment comes from non-borrowed sources. A loan would also increase your debt service ratios (GDS and TDS), which could jeopardize your qualification.

Do I need a 20% down payment to avoid mortgage insurance?

Yes. If your down payment is 20% or more of the purchase price, you are not required to obtain mortgage loan insurance. This eliminates the insurance premium, but the lender may still require a professional property appraisal and apply strict qualification criteria, including OSFI's qualifying rate (stress test).