Down Payment Options for Canadian Homebuyers

For most people I work with, the down payment is the biggest hurdle to homeownership. A down payment is the initial amount you put toward your property, while the lender covers the rest through your mortgage. In Canada, the minimum down payment is 5% on the first $500,000 of the purchase price and 10% on any portion above that. For homes priced at $1 million or more, the minimum jumps to 20%.

If you are putting down less than 20%, your mortgage has to be insured through one of Canada's three default insurance providers: CMHC, Sagen, or Canada Guaranty. This insurance comes at a cost, but it can be rolled into your mortgage rather than paid upfront. The less you put down, the higher the premium.



One recent change worth knowing about: the price cap for insured mortgages was raised to $1.5 million. That means buyers of higher-priced homes can now put down less than 20% in situations where they previously could not, which has opened up options for a lot of people, especially here on Vancouver Island where prices have climbed.

Since saving a down payment can feel overwhelming, it helps to know the different sources you can draw from. Here are the most common ones.

1. Savings and Personal Resources

The most straightforward source is your own savings. Lenders will ask to see a 90-day history of the funds in your account. Any large deposits outside of your regular payroll need to be explained with documentation, such as the sale of a vehicle or a transfer from an investment account. This is not just red tape. It is part of Canada's anti-money laundering rules, and every lender follows it.

2. The FHSA

The First Home Savings Account is one of the best tools available to first-time buyers, and a lot of people still do not know about it. You can contribute up to $8,000 per year, to a lifetime maximum of $40,000. Your contributions are tax deductible like an RRSP, and when you pull the money out to buy your first home, it comes out completely tax-free like a TFSA. You never repay it.

Your contribution room starts building the moment you open the account, so even if you are a couple of years away from buying, opening one now is a smart move.

3. RRSP Home Buyers' Plan

First-time buyers can withdraw up to $60,000 each, or $120,000 as a couple, from their RRSPs toward a down payment under the federal Home Buyers' Plan. This limit was raised recently from the old $35,000 figure, so if you read about this a while ago, the number you remember is likely out of date.

The funds come out tax-free, but they do need to be repaid into your RRSP over 15 years. This is a popular option for buyers who have been steadily contributing to their retirement savings. And yes, you can use the FHSA and the Home Buyers' Plan together on the same purchase, which can add a significant amount to your down payment.

4. Proceeds from the Sale of a Property

If you have recently sold another home, you can use the proceeds toward your new purchase. Proof of the sale, such as the final statement of adjustments from your lawyer, will be required.

5. Gifted Down Payment

With today's prices, many buyers turn to family for help. A parent or immediate family member can provide a gift that makes up part, or even all, of the required down payment. The lender will need a signed gift letter confirming the money is a true gift with no repayment expected, along with proof that the funds have landed in your account.

6. Borrowed Down Payment

In some cases you may be able to borrow your down payment. This is usually only an option if you have strong credit and enough income to support it. The payments on the borrowed funds get factored into your debt service ratios, so affordability is the deciding factor. Lenders typically use 3% of the outstanding balance when calculating that added payment.

The Bottom Line

A down payment does not have to come from just one place. It can be a combination of savings, an FHSA, your RRSP, gifted funds, or other resources. What matters most is being able to show where the money came from and that it meets lender requirements.

If you want to explore your options or find out how much you might qualify for, it is never too early to start the conversation. I help people across the Comox Valley and Vancouver Island put these pieces together every day.

Reach out anytime. Call me at 250-338-3740 or connect through cvmortgage.group, and we will build a plan to get you into your first home.