Down Payment
Definition
The down payment is the portion of a home's purchase price you pay from your own resources at closing, with the mortgage covering the rest.
How it works
In Canada the legal minimum is tiered by price: 5% on the first $500,000, 10% on the portion between $500,000 and $1,500,000, and 20% on homes priced above $1,500,000. A $700,000 purchase therefore needs $45,000 — 5% of the first $500,000 plus 10% of the next $200,000.
The 20% threshold matters most. Below 20%, the mortgage must be insured and you pay a default insurance premium. At 20% or more, the mortgage is conventional, the premium disappears, and longer amortizations become available.
Lenders also care where the money came from. Savings, investments, a sale, and a documented gift from an immediate family member are all acceptable, but you generally need to show 90 days of history for the funds. Borrowed down payments are possible with some lenders but change how you qualify.
Quick facts
- Minimum: 5% up to $500,000, 10% on $500,000–$1,500,000, 20% above $1,500,000.
- Under 20% down requires mortgage default insurance.
- Lenders usually require 90 days of source-of-funds history.
Put this into practice
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