Why Down Payment Is Home Buyers' Biggest Challenge

Forget Rates: Down Payments Are Home Buyers’ Biggest Challenge

Mortgage rates take up a lot of oxygen, but if you want breathing room in your home buying budget, it’s important to prioritize your down payment savings.

It’s possible that Canadians have thought more about mortgage interest rates over the past three years than in the previous three decades. Record-low rates, rapidly rising rates, crushing renewal rates — the hits just keep coming.

But if you’re a prospective home buyer, it’s your down payment, not rates, that should be your main focus. Rates might fall this year, but with limited supply, home prices probably won’t. Depending on what and where you’re buying, that could mean forking over a substantial minimum down payment — something that’s likely to be a challenge for a lot of people.

A NerdWallet survey conducted by The Harris Poll in January found that approximately 5.9 million Canadians who plan to buy in the next five years cannot currently afford the $20,000 down payment required on a $400,000 home.

Average down payments required in each province

To help you calibrate your down payment savings plan, NerdWallet analyzed January 2024 housing data to provide a look at some potential minimum down payment scenarios in each province.

British Columbia

Region	Average Sale Price	Minimum Down Payment Required
B.C.	$957,909	$70,791
Vancouver	$1,253,953	$250,791
Victoria	$919,777	$66,977
Fraser Valley	$1,009,678	$201,936

Alberta

Region	Average Sale Price	Minimum Down Payment Required
Alberta	$476,066	$23,803
Calgary	$569,383	$31,938
Edmonton	$381,169	$19,058

Saskatchewan

Region	Average Sale Price	Minimum Down Payment Required
Saskatchewan	$284,926	$14,246
Regina	$285,866	$14,293
Saskatoon	$385,259	$19,263

Manitoba

Region	Average Sale Price	Minimum Down Payment Required
Manitoba	$351,305	$17,565
Winnipeg	$396,833*	$19,842

Ontario

Region	Average Sale Price	Minimum Down Payment Required
Ontario	$821,624	$57,162
Toronto	$1,026,703	$205,341
Hamilton	$794,982	$54,498
Ottawa	$631,722	$38,172
Kitchener-Waterloo	$762,174	$51,217

Quebec

Region	Median Sale Price**	Minimum Down Payment Required
Quebec	$415,000	$20,750
Montreal	$535,000	$28,500
Quebec City	$360,000	$18,000

New Brunswick

Region	Average Sale Price	Minimum Down Payment Required
New Brunswick	$296,977	$14,849
Saint John	$311,863	$15,593
Moncton	$338,557	$16,928
Fredericton	$305,418	$15,271

Nova Scotia

Region	Average Sale Price	Minimum Down Payment Required
Nova Scotia	$428,539	$21,427
Halifax-Dartmouth	$581,302	$33,130

Prince Edward Island

Region	Average Sale Price	Minimum Down Payment Required
PEI	$377,844	$18,892

Newfoundland and Labrador

Region	Average Sale Price	Minimum Down Payment Required
Newfoundland and Labrador	$302,834	$15,142
St. John’s	$332,000***	$16,600

Why your down payment matters so much

It’s hard to overstate how important down payment savings are when you’re applying for a mortgage.

The country’s minimum down payment rules require you to put down a certain percentage of a home’s sale price no matter how much you’re borrowing. The smallest amount you can get away with is 5% on a home worth $500,000 or less. For homes worth more than $1 million, the minimum down payment is a whopping 20%.

When getting pre-approved for a mortgage, your lender may require you to put down more than the minimum to secure the loan you want. If the mortgage stress test limits the amount you’d be approved for at a certain interest rate, for example, making a larger down payment can make the numbers work and improve your buying power.

A larger down payment can also lower your mortgage costs. Borrowing less means paying less in interest, and if your down payment is 20% or more, you won’t have to pay for mortgage default insurance or the additional interest charges created by adding an insurance premium to your loan amount — a win-win for you.

Getting your down payment savings on track

Saving a sufficient down payment is just one of the obstacles you’ll encounter on your home buying journey. There’s no getting around this one; you can only barrel through it to the best of your ability.

Consider trying one — or all — of the following strategies:

Determine what you can afford to set aside each month and commit to a down payment savings regimen.
Take a hard look at your spending and decide if there are expenses that can be sacrificed.
Talk to your bank’s financial advisor about using registered accounts like the First Home Savings Account or Tax Free Savings Account, both of which can accelerate savings growth.

Unlike interest rates, housing supply or demand, your down payment is at least somewhat under your control. The more you’re able to save, the more influence you’ll have over your home buying situation.

*Average price of detached homes only. An average sale price factoring in all property types isn’t included in the Winnipeg Regional Real Estate Board’s monthly statistical report.

**The Quebec Professional Association of Real Estate Brokers reports the monthly median sale price rather than average sale price.

***The Newfoundland and Labrador Association of Realtors reports the composite benchmark price for homes sold in St. John’s, not the average sale price.