Let's talk about the elephant in the room when it comes to buying a home: the down payment. For most people dreaming of homeownership, this is the biggest hurdle. You've probably heard conflicting advice—some say you need 20%, others say 5% is enough, and maybe your parents told you about the "good old days" when they needed even more.
The truth? Down payment requirements in Canada have become more flexible than ever, but there are still important rules, trade-offs, and strategies you need to understand. Whether you're trying to figure out your magic number or looking for creative ways to save faster, this is everything you need to know about down payments in 2026.
The Basics: What You Actually Need
Here's the baseline: in Canada, the minimum down payment depends on the price of the home you're buying. It's not a one-size-fits-all number, and understanding the tiers is crucial to planning your budget.
Minimum Down Payment Requirements:
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1
Homes under $500,000:
You need a minimum of 5% down payment
Example: $450,000 home = $22,500 minimum down payment
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2
Homes between $500,000 and $1 million:
5% on the first $500,000, plus 10% on the portion above $500,000
Example: $750,000 home = $25,000 (5% of $500K) + $25,000 (10% of $250K) = $50,000 total
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3
Homes over $1 million:
You need a minimum of 20% down payment (no exceptions)
Example: $1.2 million home = $240,000 minimum down payment
Notice something interesting? The more expensive the home, the larger your minimum down payment needs to be—not just in dollar terms, but also as a percentage. This is by design to help ensure buyers aren't overextending themselves on pricier properties.
The CMHC Insurance Factor
Here's where things get interesting—and a bit more expensive. If you put down less than 20%, you're required to purchase mortgage default insurance (often called CMHC insurance, even though it can also come from other providers like Canada Guaranty or Sagen).
This insurance isn't for your benefit—it protects the lender in case you default on your mortgage. But you're the one paying for it, and it can add a significant amount to your overall mortgage.
CMHC Insurance Premium Rates (2026):
| Down Payment | Premium Rate |
|---|---|
| 5% to 9.99% | 4.00% |
| 10% to 14.99% | 3.10% |
| 15% to 19.99% | 2.80% |
| 20% or more | 0% (No insurance required!) |
Let's make this real with an example. Say you're buying a $500,000 home with a 5% down payment ($25,000). Your mortgage amount is $475,000. The insurance premium would be 4% of $475,000 = $19,000.
That $19,000 gets added to your mortgage, so you're actually borrowing $494,000 total. Over a 25-year amortization at 5% interest, you'll pay interest on that insurance premium too, which adds up to thousands more over time.
The 20% Sweet Spot:
This is why so many people aim for 20% down—it's not just about having more equity. You completely avoid CMHC insurance, which can save you tens of thousands of dollars. But that doesn't mean less than 20% is a bad decision. Sometimes it makes more sense to buy sooner with insurance than to wait years saving for 20%.
Where Can Your Down Payment Come From?
You don't have to save every penny yourself from your paycheck. Canadian rules allow your down payment to come from various sources, and understanding these options can dramatically speed up your timeline to homeownership.
Personal Savings
This is the most straightforward source—money you've saved in your bank accounts, TFSAs, or non-registered investments. Lenders will want to see at least 90 days of bank statements to verify these funds have been in your account (they're looking for "seasoned" funds, not a sudden deposit that might be a loan).
Pro tip: Keep your down payment savings separate from your everyday spending account. It makes tracking easier and shows lenders clear proof of your savings discipline.
RRSP Home Buyers' Plan (HBP)
This is one of Canada's best-kept secrets for first-time buyers. You can withdraw up to $35,000 from your RRSP tax-free to use as a down payment (or up to $70,000 if you're buying with a partner and both have RRSPs).
The catch? You need to pay it back to your RRSP over 15 years. If you don't make the minimum annual repayment, that amount gets added to your taxable income for that year. But if you're disciplined, this is essentially an interest-free loan from yourself.
Bonus: Contributing to your RRSP not only helps you save for a home, but you also get a tax deduction that can boost your refund—which you can then use toward your down payment!
First Home Savings Account (FHSA)
This is the newest tool in your arsenal. Introduced in 2023, the FHSA lets you contribute up to $8,000 per year (lifetime maximum of $40,000) and get a tax deduction—just like an RRSP. But unlike an RRSP, when you withdraw the money to buy your first home, it's completely tax-free, and you don't have to pay it back.
Think of it as the best of both RRSPs and TFSAs combined, but specifically for home buying. If you're a first-time buyer and haven't opened an FHSA yet, you're leaving money on the table.
Gifts from Family
Many first-time buyers get help from parents or grandparents. This is completely allowed! The gift can cover part or all of your down payment. However, your family member will need to sign a gift letter confirming that it's a true gift with no expectation of repayment.
Important: The gift must come from an immediate family member (parent, grandparent, sibling). A gift from a friend or extended family might not be accepted by lenders.
Proceeds from Selling Another Property
If you currently own a home, condo, or even land, the equity from selling it can go toward your down payment. This is common for people moving up to a bigger home or relocating to a different area.
How to Save Faster: Real Strategies That Work
Saving a down payment can feel overwhelming, especially in expensive markets. But with the right approach, you can accelerate your timeline significantly. Here are strategies that actually make a difference:
1. Automate Your Savings
Set up automatic transfers on payday—before you have a chance to spend the money. Even $200 per paycheck adds up to $5,200 per year. If both you and a partner do this, that's over $10,000 annually.
Treat your down payment savings like a bill you have to pay. You'll be amazed how quickly you adjust your spending.
2. Cut One Big Expense
Instead of trying to cut $10 here and $20 there, identify one significant expense you can eliminate or reduce. That might be trading in a car payment for a cheaper vehicle (or going car-free), moving to a cheaper rental, or canceling subscriptions you rarely use.
Example: A $400/month car payment you eliminate for 2 years = $9,600 in down payment savings.
3. Max Out Your FHSA and RRSP Contributions
Contribute to your FHSA and RRSP, then use your tax refund to add even more to your down payment fund. This creates a compounding effect where your contributions do double duty.
Example: $8,000 FHSA contribution at a 30% tax rate = $2,400 tax refund to add to savings.
4. Bank Your Windfalls
Tax refunds, work bonuses, birthday cash, inheritance—put 100% of unexpected money directly into your down payment fund. These windfalls can shave months or even years off your saving timeline.
5. Consider a Side Hustle
Dedicate side income exclusively to your down payment. Whether it's freelancing, driving for a rideshare service, or selling items online, the extra cash can make a huge difference when it's 100% focused on your goal.
Don't Make These Down Payment Mistakes
❌ Draining Your Entire Savings
Don't put every last dollar into your down payment. You'll need money for closing costs (typically 1.5% to 4% of the purchase price), moving expenses, furniture, and an emergency fund. Running out of money right after buying is a recipe for stress.
❌ Borrowing Your Down Payment
Some people try to take out a loan or use credit cards to cobble together a down payment. This is a red flag to lenders and can disqualify you from getting a mortgage. Your down payment needs to be genuine savings or a true gift—not borrowed money.
❌ Ignoring Closing Costs
Legal fees, land transfer taxes, title insurance, home inspections, appraisals—these add up fast. In Ontario, for example, the land transfer tax alone on a $600,000 home is over $8,000 (though first-time buyers get a rebate up to $4,000).
❌ Making Large Purchases Before Closing
Don't buy furniture, a new car, or take on other debt between getting mortgage approval and closing. Lenders often do a final credit check, and new debt can torpedo your approval at the last minute.
Your Down Payment Journey
There's no single "right" down payment amount. For some people, 5% makes sense because it gets them into the market sooner in an appreciating market. For others, waiting to save 20% is worth it to avoid insurance premiums and start with more equity.
What matters most is that you understand the trade-offs, know your options, and have a realistic plan to reach your target. Whether that's $25,000 or $100,000, breaking it down into monthly savings goals and leveraging tools like the FHSA and HBP can make what seems impossible very achievable.
The housing market will always have ups and downs, but starting with a solid financial foundation—including a down payment you're comfortable with—sets you up for long-term success as a homeowner. Take your time, do the math, and make the choice that works for your unique situation. You've got this!