First-Time Home Buyers
Do You Really Need a 20% Down Payment?
Many Canadians believe they need a 20% down payment before they can buy a home. Here's where that idea comes from, how minimum down-payment rules actually work, and why you may be closer to buying than you think.
Here's the Quick Answer
No. Many Canadians can buy a home with much less than a 20% down payment.
Depending on the purchase price, you may be able to buy a home with as little as 5% down.
So why does everyone talk about 20%? Because a 20% down payment is generally the point where mortgage default insurance is no longer required.
Twenty percent is an important milestone, but it is not the minimum down payment required for every home purchase.
Why This Matters
I have spoken with people who spent years trying to save a 20% down payment because they believed it was the only way to buy a home.
Sometimes they are surprised to learn they may have been much closer than they realized.
That does not mean buying sooner is always the right choice. A larger down payment can absolutely have advantages. But understanding how the rules actually work allows you to make decisions based on your own financial situation instead of a common mortgage myth.
Why Does Everyone Talk About 20%?
The idea that every buyer needs a 20% down payment is one of the most common mortgage misconceptions in Canada.
It is easy to understand why the idea became so widespread. Twenty percent matters because it is generally the point at which mortgage default insurance is no longer required.
When your down payment is 20% or more, your mortgage is generally considered a conventional mortgage. When your down payment is less than 20%, the mortgage will usually need to be insured.
That does not make 20% the minimum down payment for every purchase. It simply marks the difference between an insured and an uninsured mortgage.
How Much Down Payment Do You Actually Need?
The minimum down payment depends on the purchase price of the property.
| Purchase Price | Minimum Down Payment |
|---|---|
| $500,000 or less | 5% of the purchase price |
| More than $500,000 but less than $1,500,000 | 5% on the first $500,000 and 10% on the remaining amount |
| $1,500,000 or more | At least 20% of the purchase price |
These are minimum requirements. A lender may require a larger down payment depending on the property, your application, the source of your funds, or other lending considerations.
Let’s Use an Example
Sometimes the easiest way to understand the calculation is to see the numbers laid out.
Example
Buying a $650,000 Home
Here is how the minimum down payment would be calculated:
First $500,000
5% down payment
$25,000
Remaining $150,000
10% down payment
$15,000
Minimum Down Payment
$40,000
In this example, the buyer would not need a $130,000 down payment, which would represent 20% of the purchase price.
The minimum down payment would be $40,000, subject to qualification, lender approval, and mortgage-insurance approval.
What Happens When You Put Less Than 20% Down?
When your down payment is less than 20%, mortgage default insurance will usually be required.
Despite its name, this insurance does not protect the homebuyer. It protects the lender if the borrower is unable to repay the mortgage.
The buyer is generally responsible for the insurance premium. In most cases, that premium is added to the mortgage rather than paid entirely upfront.
Mortgage default insurance increases the amount borrowed, but it can also allow qualified buyers to purchase without spending several additional years trying to reach a 20% down payment.
Is a 20% Down Payment Still Worth Considering?
Absolutely. A 20% down payment can provide meaningful advantages, including a smaller mortgage and no mortgage default insurance premium.
It may also reduce your monthly payment and give you more equity in the home from the beginning.
But using every dollar you have for the down payment is not always ideal. You may also need money for legal fees, property transfer tax where applicable, moving expenses, immediate repairs, furnishings, and an emergency fund.
The Bigger Picture
The goal is not simply to make the largest down payment possible. It is to choose an amount that supports both the purchase and your financial comfort after you move in.
Should You Keep Saving or Buy With Less?
There is no single answer that works for every buyer.
Continuing to save may reduce your mortgage, eliminate the default insurance premium, or leave you with a more comfortable monthly payment.
Buying with less than 20% may allow you to move sooner, meet an important housing need, or stop waiting for an arbitrary savings target that may not be required.
The better question is not simply whether you can reach 20%. It is whether your down payment, mortgage payment, closing costs, and remaining savings create a home-buying plan that feels sustainable for you.
Common Questions
Can I buy a home with only 5% down?
Possibly. For a home priced at $500,000 or less, the minimum down payment may be 5%, subject to lender approval and mortgage-insurance requirements.
What happens if my down payment is less than 20%?
Your mortgage will usually require mortgage default insurance. This insurance protects the lender, although the premium is generally paid by the borrower and added to the mortgage.
Do I have to pay mortgage default insurance upfront?
Usually not. The insurance premium is commonly added to the mortgage amount and repaid as part of your regular mortgage payments.
Is it always better to wait until I have 20% down?
Not necessarily. A larger down payment can reduce your mortgage and eliminate the insurance premium, but waiting may not always be the best choice. Your timeline, savings, income, housing needs, and local market conditions all matter.
Does putting 20% down reduce my mortgage payment?
Generally, yes. You are borrowing less, and you will usually avoid the cost of mortgage default insurance. Your final payment will also depend on your interest rate, amortization, and mortgage structure.
Down Payment Calculator
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Enter a potential purchase price to see how the minimum down payment may be calculated and compare it with a larger down payment.
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Continue Exploring
Here are a few related answers, guides, and tools that may help you take the next step.
Mortgage Minute
What Is Mortgage Default Insurance?
Learn why mortgage default insurance exists, when it is required, and what it actually covers.
Mortgage Minute
How Much Money Do I Need to Buy a Home?
Plan for the down payment, closing costs, moving expenses, and the savings you may want to keep after buying.
Mortgage Guide
First-Time Home Buyers
Follow the home-buying journey from early planning through financing, making an offer, and receiving the keys.
Personal Guidance
You May Be Closer Than You Think.
Every purchase is different. I can help you understand how much down payment you may need, what other costs to plan for, and what monthly payment would feel comfortable before you begin shopping.
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