How much down payment do you need?

You do not automatically need a twenty-percent down payment to buy a home. The minimum depends on the purchase price and whether mortgage loan insurance is available. The amount you should save can still be higher than the minimum because closing costs, an emergency reserve and lender qualification all sit outside that first calculation.

Calculate the minimum by price tier

For an owner-occupied property eligible for insured financing, the minimum down payment is 5% of the first $500,000 of the purchase price and 10% of the portion above $500,000 up to $1.5 million. A property priced at $1.5 million or more is not eligible for insured financing under this limit, so a conventional down payment is required. The current thresholds were part of the federal mortgage reforms that took effect in December 2024 and are described by the Department of Finance Canada.

For a $400,000 purchase, the minimum is $20,000. For a $700,000 purchase, the first tier contributes $25,000 and the remaining $200,000 contributes $20,000, for a minimum of $45,000. That is the minimum equity calculation, not the complete cash requirement.

Mortgage insurance protects the lender, not the borrower. Its premium is generally added to the mortgage balance, which increases the amount financed. Putting more down can reduce that premium or avoid it once the conventional-financing threshold is reached, but waiting to reach that threshold is not automatically the right decision. Purchase price, rent, savings pace and market risk all belong in the comparison.

Keep closing costs separate

The down payment cannot do double duty as the money needed for the notary, inspection, appraisal, adjustment of property taxes, moving costs and the transfer tax. The Financial Consumer Agency of Canada advises budgeting roughly 1.5% to 4% of the purchase price for closing costs. The actual amount depends on the transaction and location.

On a $400,000 property, arriving with exactly $20,000 can therefore leave the purchase underfunded even though the minimum down payment is covered. The lender may also ask for evidence that closing costs are available separately. An emergency reserve after closing matters because insurance, utilities, repairs and furnishing begin immediately.

A practical savings target has three columns: the required down payment, estimated transaction costs and the cash you want to keep after the keys are delivered. This prevents the purchase price target from consuming every available dollar.

Use the FHSA deliberately

The First Home Savings Account combines a deduction for eligible contributions with tax-free qualifying withdrawals. The annual participation room is $8,000 and the lifetime participation limit is $40,000. The Canada Revenue Agency explains FHSA participation room and deductions, including when room begins to accumulate.

Opening the account matters because FHSA room does not begin merely because you intend to buy one day. Contribution timing and available room should be confirmed before transferring funds. A qualifying withdrawal also has conditions, so the planned closing date and account paperwork need to align.

The tax refund generated by a deductible contribution can itself be directed toward closing costs or a future contribution. Do not assume the refund will arrive before the purchase unless the tax filing and closing calendar support that plan.

Add the Home Buyers' Plan carefully

The Home Buyers' Plan allows an eligible buyer to withdraw up to $60,000 from an RRSP for a qualifying home purchase. Unlike a qualifying FHSA withdrawal, the HBP amount must be repaid to the RRSP over time under the program rules. The Canada Revenue Agency publishes the HBP eligibility, withdrawal and repayment rules.

Using the maximum is not automatically useful. An RRSP withdrawal removes invested funds, creates future repayment obligations and may leave less retirement capital compounding. Compare the cash needed for the purchase with the effect on your longer-term plan. It may be sensible to use only part of the available amount.

Eligible couples can each use their own FHSA and HBP amounts when the rules are met. The accounts remain individual, so room, ownership history, documents and withdrawal timing should be checked for each person rather than treated as one shared limit.

Build the plan backward from a target price

Suppose a buyer is considering a $700,000 property and has $58,000 available between cash and registered plans. The minimum down payment calculation uses $45,000, leaving $13,000 before transaction costs and reserves. That does not answer whether the purchase is ready. The next step is to estimate costs, identify which funds can be withdrawn on time and confirm that the resulting mortgage payment fits the budget.

Source-of-funds documentation also matters. Lenders commonly review account histories and require an explanation for recent large deposits. A gift, sale of an asset or transfer between accounts should have a clear paper trail. Preparing that trail before an accepted offer reduces delays.

For self-employed buyers, the down payment may be ready while eligible income remains the limiting factor. Our guide to how lenders verify self-employed income explains why the tax return and supporting documents need to be reviewed alongside the savings plan.

Confirm the full file before shopping

A prequalification should connect the target price, minimum equity, closing costs, debts, income and monthly comfort level. I review those pieces together and map which accounts will provide each dollar. If waiting would materially strengthen the file, that should be visible before a purchase offer. If the existing savings are sufficient, the plan should show the reserve that remains after closing.

You can start a prequalification before touring properties. The purpose is not to stretch the purchase to the largest amount a formula permits. It is to know the price range and cash requirement that leave the household functional after the transaction.

Program limits and lender rules can change. Verify the current official conditions and the details of your own file before moving or withdrawing registered funds.

Certain conditions may apply. Subject to change without notice.