Key points from this article:
- Understanding what a down payment is and how to calculate the minimum required amount.
- How the size of your down payment impacts your total mortgage cost and insurance premiums.
- Actionable tips to accelerate your savings, including debt management and government incentives.
- How the FHSA, Home Buyers' Plan and TFSA can support a savings plan.
Buying a home is one of the biggest financial decisions most people make, and the down payment is often the biggest hurdle. In Canada, understanding the rules and strategies for saving can make the path to homeownership much smoother. Whether you are a newcomer or a long-time resident, having a solid plan is essential.
What is a down payment?
A down payment is the portion of the home's purchase price that you pay upfront from your own funds. It represents your initial equity in the property. The remaining balance is typically covered by a mortgage loan from a bank or lender.
The size of your down payment determines the size of your mortgage. A larger down payment means a smaller mortgage, which leads to lower monthly payments and less interest paid over the life of the loan.
How to calculate a minimum down payment in Canada
In Canada, the minimum down payment required depends on the purchase price of the home. Here is the breakdown:
- Purchase price of $500,000 or less: 5% of the purchase price.
- Purchase price between $500,000 and $1,499,999: 5% of the first $500,000, and 10% for the portion above $500,000.
- Purchase price of $1.5 million or more: 20% of the purchase price.
For example, if you are buying a home for $600,000:
- 5% on the first $500,000 = $25,000
- 10% on the remaining $100,000 = $10,000
- Total minimum down payment = $35,000
Interactive Down Payment Calculator
Enter a home price to see the minimum down payment required.
How a down payment affects the total cost of your mortgage
Your down payment amount has a direct impact on your total mortgage cost in two main ways: interest and mortgage default insurance.
Interest Savings
Putting down more money upfront reduces the principal amount you need to borrow. This naturally decreases the total interest you will pay over the amortization period of the loan.
Mortgage Default Insurance
If your down payment is less than 20% of the purchase price, you are required to purchase mortgage default insurance (often called CMHC insurance). This insurance protects the lender in case you default on your payments. The premium is calculated as a percentage of the mortgage amount and can be added to your mortgage balance.
If you can save a down payment of 20% or more, you avoid this insurance cost entirely, which can save you thousands of dollars.
Tips for saving for a down payment in Canada
Saving tens of thousands of dollars can be daunting, but with discipline and the right strategies, it is achievable. Here are 7 tips to help you reach your goal.
1. Prioritize your financial and life goals
Before you start saving, define your timeline. When do you want to buy? How much do you need? Treat your down payment fund as a non-negotiable expense in your monthly budget. Automating transfers to a dedicated savings account on payday is a great way to ensure you pay yourself first.
2. Pay off your debts before considering a mortgage
High-interest debt, like credit card balances, can hinder your ability to save. Focus on clearing these debts first. Lenders also look at your debt-to-income ratio when qualifying you for a mortgage. Lower debt means you can qualify for a larger mortgage amount and better rates.
3. Keep your credit score in good standing
Your credit score is a report card of your financial health. Lenders use it to determine your reliability. A higher credit score helps you secure a mortgage with a lower interest rate. Pay your bills on time, keep your credit card balances low, and avoid applying for too much new credit at once.
4. Consider a First Home Savings Account (FHSA)
An FHSA lets an eligible first-time home buyer save for a qualifying home using tax-deductible contributions and tax-free qualifying withdrawals. The annual contribution limit is generally $8,000 and the lifetime limit is $40,000. Opening an account starts your FHSA participation period, so review the eligibility and timing rules before contributing.
5. Use the Home Buyers' Plan if it fits your situation
The Home Buyers' Plan (HBP) may allow an eligible buyer to withdraw up to $60,000 from an RRSP to buy or build a qualifying home. Eligible partners may each make a withdrawal. HBP amounts normally have to be repaid to an RRSP over 15 years; the first repayment year depends on when the first withdrawal was made. You may be able to use the HBP and an FHSA for the same qualifying home if you meet the conditions for both programs.
6. Use savings from your TFSA
A Tax-Free Savings Account (TFSA) is another excellent tool. Unlike the RRSP, withdrawals from a TFSA are not taxable and you don't have to pay them back. The investment growth within the account is also tax-free, helping your savings grow faster.
7. Factor in closing, maintenance and moving costs
When setting your savings goal, remember that the down payment isn't the only upfront cost. You also need to save for:
- Closing costs: Legal fees, land transfer taxes, and adjustments (1.5% - 4% of purchase price).
- Moving expenses: Movers, utility setup fees.
- Immediate maintenance/renovations: Painting, repairs, or new furniture.
Having a buffer ensures you don't become "house poor" immediately after moving in.
A discontinued program to watch for in older articles
The federal First-Time Home Buyer Incentive stopped accepting new applications on March 21, 2024. It should not be included in a current savings plan. Previously approved participants should use CMHC's instructions for their existing incentive.
Official sources and last review
- Financial Consumer Agency of Canada: minimum down payments
- Canada Revenue Agency: First Home Savings Account
- Canada Revenue Agency: Home Buyers' Plan
- CMHC: discontinued First-Time Home Buyer Incentive
Last reviewed: September 24, 2026. Rules, limits and lender requirements can change; verify the official sources before making a financial decision.
Legal disclaimer
This document is for general information only and is not intended to provide legal, financial or other professional advice. For advice tailored to your particular circumstances, please consult an appropriate professional. We do not guarantee the accuracy, completeness or timeliness of the information, nor should it be construed as an exhaustive discussion of the topics discussed. Opinions expressed are those of the author(s) at the time of writing and may be updated over time. We do not implicitly or explicitly endorse any third parties or their advice, views, information, products or services.
