Mortgage Down Payment Calculator

A down payment is the upfront amount you pay toward the purchase of a home. The size of your down payment affects your mortgage amount, monthly payments, mortgage default insurance, and the home price you can afford. This guide covers everything you need to know about down payments in Canada.

How much down payment do you need in Canada?

The minimum down payment required in Canada depends on the purchase price of the home. While a 20% down payment is often recommended to avoid mortgage default insurance, many homebuyers qualify with much less.

Here are the minimum down payment requirements- 

If your down payment is less than 20%, you'll need to purchase mortgage default insurance. Because borrowers with smaller down payments have less equity in their homes, they're considered to pose a higher lending risk. The insurance premium is calculated as a percentage of your mortgage amount and is typically added to your mortgage rather than paid upfront. Homebuyers who make a 20% or greater down payment have a conventional mortgage and aren't required to purchase mortgage default insurance.

How does the Mortgage Down Payment calculator work?

The Mortgage Down Payment Calculator helps you estimate your minimum down payment, mortgage default insurance premium, and total mortgage amount based on the home's asking price. To get started, enter the asking price of the home you're considering. The calculator will automatically calculate the minimum down payment required under Canadian mortgage rules and display four common down payment scenarios. You can also customize your down payment amount — either by percentage or dollar value — to see how different down payment sizes affect the results. 

For example, with an asking price of $700,000, the calculator provides the following scenarios:

• A 6.43% down payment ($45,000) results in $26,200 of CMHC insurance and a total mortgage of $681,200.
• A 10% down payment ($70,000) reduces the CMHC insurance to $19,530, bringing the total mortgage to $649,530.
• A 15% down payment ($105,000) lowers the CMHC insurance further to $16,660, for a total mortgage of $611,660.
• With a 20% down payment ($140,000), there’s no CMHC insurance required, and the total mortgage is $560,000.

What does your down payment affect?

Your down payment affects much more than how much you'll pay upfront. It can influence the home you can afford, your monthly mortgage payment, the amount of mortgage default insurance you'll pay, and how much equity you build in your home.

1. Your buying power

The size of your down payment also affects the maximum purchase price you can buy under Canada's minimum down payment rules. For example, a $25,000 down payment is enough to meet the minimum requirement for a $500,000 home, while a $40,000 down payment meets the minimum requirement for a home worth approximately $650,000.

Keep in mind that your actual home-buying budget also depends on factors such as your income, debt, credit score, and the mortgage stress test. For a more accurate estimate based on your income and debts, use our Mortgage Affordability Calculator.

2. Your mortgage payments and interest costs

A larger down payment reduces the amount you need to borrow. Because your mortgage balance is smaller, you'll generally have lower monthly mortgage payments and pay less interest over the life of your mortgage. For example, on a $300,000 home, increasing your down payment from $25,000 to $40,000 lowers your mortgage balance and reduces your mortgage default insurance premium by $2,423. Over a 25-year amortization, this can also save you thousands of dollars in interest.

3. Mortgage default insurance

If your down payment is less than 20%, you'll need mortgage default insurance. The premium is calculated as a percentage of your mortgage amount, so increasing your down payment reduces the insurance premium you'll pay. Once you reach a 20% down payment, mortgage default insurance is no longer required.

*Eligible first-time home buyers and purchasers of newly built homes who choose a 30-year amortization period pay an additional 0.20% premium on insured mortgages.

4. Home equity

Your down payment becomes your initial equity in your home. A larger down payment means you own a greater share of the property from the start, which can make refinancing easier, improve your financial flexibility, and reduce the risk of owing more than your home is worth if property values decline.

5. Mortgage approval and loan-to-value (LTV) ratio

A larger down payment lowers your loan-to-value (LTV) ratio, which is the percentage of your home's value that you're borrowing. A lower LTV means you're financing less of the purchase price, reducing the lender's risk. While mortgage approval depends on factors such as your income, credit score, and debt levels, a lower LTV can strengthen your mortgage application. Depending on the lender and mortgage product, it may also improve your access to more competitive mortgage rates or financing options.

Where can your down payment come from?

Your down payment can come from more than one place, but your lender will need to verify the source of the funds before approving your mortgage. Here are some common ways homebuyers in Canada fund their down payment.

• • Savings: Savings held in a chequing or savings account are the most common source of a down payment. Lenders typically require proof that the funds have been in your account for at least 90 days, although requirements may vary by lender.
  • Investments: Many lenders allow you to use money from investments, such as stocks, bonds, mutual funds, ETFs, or Guaranteed Investment Certificates (GICs). If you plan to sell investments to fund your down payment, remember to account for settlement times and any taxes that may apply.

• Proceeds from selling another property: If you're selling your current home, you can use the equity from the sale toward the down payment on your next property. Your lender may require documentation confirming the sale and the amount of equity available.

• Gifted down payment: A financial gift from an immediate family member is commonly accepted as a down payment. Most lenders require a signed gift letter confirming that the funds are a gift and don't need to be repaid.

• First Home Savings Account: The First Home Savings Account (FHSA) is a registered savings account designed to help eligible first-time home buyers save for a down payment. Contributions are tax-deductible, investment growth is tax-free, and qualifying withdrawals for a home purchase are also tax-free, making it one of the most tax-efficient ways to save for a first home.
• Home Buyers' Plan (HBP): Eligible first-time home buyers can withdraw up to $60,000 per person from their Registered Retirement Savings Plan (RRSP) through the Home Buyers' Plan. The withdrawal is tax-free, but the amount must be repaid to your RRSP over time to avoid being taxed as income.

How to save for a down payment

Saving for a down payment can feel overwhelming, but having a clear plan can help you reach your homeownership goals sooner. Whether you're buying your first home or moving to a new one, these strategies can help you build your down payment faster.

• Set a savings goal: Start by estimating how much you'll need for your down payment based on the type and price of home you're hoping to buy. Remember to budget for closing costs in addition to your down payment so you're financially prepared on closing day.
• Create a monthly savings plan: Break your savings goal into manageable monthly contributions and automate transfers to a dedicated savings account. Setting up automatic deposits can help you stay on track and avoid spending money you've earmarked for your home purchase.
• Reduce high-interest debt: Paying down high-interest debt, such as credit cards or personal loans, can free up more money for your down payment. It may also improve your debt service ratios, which lenders consider when assessing your mortgage application.
• Increase your income or reduce expenses: Look for opportunities to accelerate your savings by cutting discretionary spending, increasing your income through a side job or freelance work, or directing bonuses and tax refunds toward your down payment fund.
• Take advantage of government savings programs: If you're an eligible first-time home buyer, consider opening an FHSA or using the Home Buyers' Plan to help fund your down payment. These programs offer valuable tax advantages that can help you save more efficiently.