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Loans and borrowing

Making a down payment on a home: tips and advice

May 31, 2024

If you're buying your first home, you'll need a mortgage, and if you want a mortgage, you'll need a down payment. But how much do you need to save, and how do you do it? Read on for everything you need to know to get started. 

How much do you need for a down payment? 

A down payment is the amount you pay up front when buying a home. You can't get a mortgage, which covers the rest of the purchase, without making a down payment.

Generally speaking, a down payment should be at least 5% of the property's purchase price, but should ideally be 20%1. That's because a larger down payment means lower mortgage payments. In certain cases, the down payment can be based on a set value determined by the lender. For example, it can be based on the market value, or another value.

Example: How to calculate a down payment*  

The amount you put down depends on the price of the property. In some cases, it can also be higher, depending on the lender's conditions.

If the price of the property is $500,000 or less, you'll need a down payment of at least 5%.

For example, if you'd like to buy a property listed at $350,000, you'd have to put down $17,500, which is 5% of the purchase price. If you wanted to put down 20% of the purchase price, you'd need to save up $70,000.

If the price of the property is more than $500,000, you'll have to put down more than 5%

For example, if you buy a property for $650,000, the minimum down payment would be 5% on the first $500,000 ($25,000) plus 10% on the remaining amount ($15,000), for a total of $40,000. However, a 20% down payment (in this case, $130,000) is still preferable, since you'd be able to skip the mortgage insurance and reduce the total cost of your mortgage.

If your down payment is less than 20%

If you don't have that much saved up, you can still get a mortgage. However, you'll need to get mortgage insurance. This will increase the total cost of your mortgage, but will let you make a smaller down payment. 

What is mortgage insurance?

Mortgage insurance, provided by CMHC or Sagen, protects your financial institution if you don't make your payments. Mortgage insurance is generally required if your down payment is less than 20% of the home's recognized value. The premium can be added to your mortgage.

Don't forget about the closing costs! 

Generally, you can expect closing costs to add up to between 3% and 5% of the purchase price of your new home.  You'll have to show that you have money set aside for this when you apply for a mortgage. If you don't, it can be rolled into your mortgage. Closing costs cover basic expenses tied to purchasing a home, such as:

Inspection and appraisal fees

  • Legal fees
  • The land transfer tax, known in Quebec as the "welcome tax"
  • Home insurance
  • Hook-up fees (electricity, internet, etc.)
  • Home and yard maintenance
  • Moving costs
  • Allocation and account adjustment fees

This tool can help you calculate potential closing costs. 

How can you maximize your down payment?  

Saving up for a down payment can be no small task. Fortunately, there are certain tax benefits and plans that can help you save. You can also take advantage of some government financial incentives, or, if you can, get help from your family. These are all options that can help you.

Start saving as early as possible

Time is on your side: if you start saving early, you'll earn more interest, and your money will grow faster. Setting up automatic transfers can be a good way to save regularly, without even having to think about it.

Make the most of tax-advantaged savings plans

There are different savings plans that can help you save up for your down payment. 

First home savings account (FHSA)

The first home savings account (FHSA) is designed to help people buy their first home. If you're eligible, you can open one. 

  • Contributions made to an FHSA are deductible, which reduces your taxable income.
  • Withdrawals are not taxable, subject to certain conditions, if they are used to buy a qualifying home.
  • The yearly FHSA contribution limit is $8,000, while the lifetime limit is $40,000. 
Home Buyers' Plan

If you have a registered retirement savings plan (RRSP), you can use it to help you buy a first home. So long as you meet certain conditions, the Home Buyers' Plan (HBP) allows you to take out up to $60,000 from your RRSP tax-free in the year you buy or build your first home. If you have a partner and each of you withdraws the maximum allowable amount from your RRSPs, this amount could be as high as $120,000. In addition, RRSP contributions reduce your taxable income. You can also, depending on your situation, take out an RRSP loan to increase your contributions. 

Tax-free savings account 

You can use a tax-free savings account (TFSA) to grow your savings tax-free. You can use the money in your TFSA for anything you like—including saving for a down payment. You can also withdraw money from your TFSA and contribute it to your RRSP for the tax benefits. 

Take advantage of government and municipal programs  

Did you know? Canada's federal and provincial governments have various initiatives to help first-time home buyers.

Look for tax credits and incentives

Before you start house-hunting

Making a detailed budget that lists your income, expenses and debts is a good place to start. This will help you determine how big a mortgage you can afford. You can use an online tool to help. This information will help your advisor get an accurate picture of your financial situation and suggest an appropriate amount to borrow.  

Keep your debt under control

Ideally, you shouldn't spend more than 32% of your household income (before taxes) on housing, and no more than 40% on repaying  debt.

Most importantly, don't get in over your head! This will both give you more flexibility to enjoy your life, and help you weather the unexpected. 

Contact us for your next steps 

Remember, no matter what your situation is, and no matter what you're looking to achieve, it's never too early to start saving for a down payment.

There are many ways to help make your dream of becoming a homeowner a reality. For example, you can buy property with your family or friends, rent out a part of your future residence or even decide to live in a multigenerational home. In any case, turn to people with experience to help answer your questions and guide you along the way. Buying a home is important—don't take a gamble on it! 


Insurer requirement.

1 Source:

* Minimum down payment amount based on the home's purchase price.

If the purchase price of your home is $500,000 or less, the minimum down payment is 5%.

If the purchase price of your home is between $500,000 and $999,999, the minimum down payment is 5% for the first $500,000 and 10% for the rest.

If the purchase price of your home is $1 million or more, the minimum down payment is 20%.