The down payment is often the biggest hurdle for buyers. The good news is that in Canada you do not always need 20% down. Here is how the minimum down payment rules work and what they mean for your purchase.
The minimum down payment rules
- Homes up to $500,000: 5% of the purchase price.
- Homes from $500,000 to $1.5 million: 5% on the first $500,000, plus 10% on the portion above $500,000.
- Homes $1.5 million and up: 20% of the purchase price.
A quick example
For a $650,000 home, the minimum down payment is 5% of $500,000 ($25,000) plus 10% of $150,000 ($15,000), for a total of $40,000.
What is mortgage default insurance?
If you put down less than 20%, your mortgage must be insured through CMHC, Sagen or Canada Guaranty. The premium is calculated as a percentage of your mortgage amount, and it gets smaller as your down payment grows. The premium is usually added to your mortgage rather than paid up front. Insured mortgages often come with some of the most competitive interest rates because the lender’s risk is lower.
Is 20% down still worth it?
Putting 20% or more down means no insurance premium and a smaller loan. On the other hand, waiting years to save 20% can mean missing out on equity growth. The right answer depends on your savings, income stability and how long you plan to stay. Many Calgary buyers choose a smaller down payment and keep an emergency fund in place instead.
Ways to build your down payment faster
- First Home Savings Account (FHSA): up to $8,000 a year, tax-deductible going in and tax-free coming out for a qualifying first home.
- RRSP Home Buyers’ Plan: borrow up to $60,000 from your own RRSP.
- Gifted funds: lenders generally accept a gift from an immediate family member with a signed gift letter.
- Automate your savings: set up a transfer every payday so saving happens before spending.
Do not forget the extra costs
Lenders want to see that you have enough set aside for closing costs on top of your down payment. In Alberta, plan for legal fees, land title and mortgage registration fees, a home inspection and moving costs.
Not sure what price range makes sense for you? Talk to the Apollo team and we will help you map out a plan that fits your goals.
