How Much for a Down Payment on a House?

If you’re getting a mortgage for a home worth up to $500,000, the minimum down payment is 5%. Homes worth more need larger down payments.

The exact amount you’ll need for a down payment depends on three factors: Canada’s mortgage guidelines, the price of the home you’re buying and the requirements of your mortgage lender. That third factor might remain a mystery until later in your real estate search, but you can still get a good idea of how much down payment you’ll need by doing some simple calculations.

What is a down payment?

When you get a mortgage, the down payment is the amount you’re required to pay upfront. It represents a portion of the price of the house you hope to buy.

A down payment is typically made in cash, with the remaining cost of the home covered by a mortgage. The bigger the down payment, the smaller the mortgage. At least for a little while, your home equity — the value of your house minus the mortgage amount — will be equal to your down payment amount.

Down payment minimums

Canada’s lending rules have specific guidelines around minimum down payment sizes:

» See the minimums in your province: Monthly Down Payment Monitor

There are cases where a lender may require a bigger down payment in order to approve you for a mortgage.People who are self-employed or have a poor credit history, for example, often need to put down more than the minimum. And if the monthly mortgage payments on a particular home are too big for a homebuyer’s budget, a larger down payment may be required to reduce the size of the mortgage — and the size of those payments — to a more manageable level.

Ways to save for a down payment

If a 5%, 10% or 20% down payment feels like an awfully big number, you’re not wrong. The best way to save up a down payment is to start early.

Prioritize and budget

Look into your budget and see where if there are places to reduce costs and save money. While lowering your day-to-day expenses will help, prepare to make even greater sacrifices in pursuit of your goal. This might mean cutting out vacations, holding off on upgrading your devices, or driving a cheaper vehicle until you’re a homeowner.

Reduce your debt

It’s hard to save if you’re making monthly payments to creditors, so consider paying off your debts. An added benefit is that reducing debt will improve your debt service ratios, making it much easier for you to qualify for a mortgage.

Start a down payment savings account

Set up a savings account for your down payment. If possible, automate it and transfer money to the account every time you get paid.

A tax-free savings account (TFSA) or high-interest savings account (HISA) are accounts every prospective home buyer should consider. With a TFSA, you can invest the money you save in the account and not pay any tax on the earnings. And with a HISA, you’ll have easy access to your money while earning more interest than a basic savings account.

Borrow from your RRSP

Dipping into your retirement savings for a down payment is an option you should approach with caution, but it can be a way to become a home owner on a faster timeline. If you have a registered retirement savings plan (RRSP) you can borrow up to $35,000 from it, tax-free, for your first home as part of the Home Buyers’ Plan. That $35,000 could make up a significant chunk of your down payment.