Minimum Down Payment to Buy a Home in Ontario: How Much You Need

Most people shopping for a home in Ontario ask the same first question: how much cash do I need before a lender will even talk to me? The answer is not one flat percentage. It changes with the price of the home, and it affects whether you need mortgage insurance.

This article walks through the minimum down payment rules, three worked examples, how a gift from a relative fits in, what newcomers should know, and two registered programs that can help you save. Your lender may ask for more than the minimum, so treat these figures as a starting point.

The tiered minimum down payment

Federal guidance sets the minimum down payment in tiers based on the purchase price. The percentage is not applied to the whole price in the middle tier. Each slice of the price has its own rate.

These are minimums. A lender can set stricter requirements based on your income, credit and the property.

Worked examples at three price points

Here is how the tiers apply at three different price points. You can plug your own numbers into each rule.

• A home at $500,000 or less: the minimum is 5% of the whole price.
• A home between $500,000 and $1.5 million: the minimum is 5% of the first $500,000 plus 10% of the portion above $500,000.
• A home at $1.5 million or more: the minimum is 20% of the price.

Notice the jump at the top. A buyer just under $1.5 million still uses the tiered formula, while a buyer at $1.5 million or more needs a full 20% of the price.

When mortgage loan insurance comes in

If your down payment is below 20%, you will typically need mortgage loan insurance. A buyer who puts down only the minimum in the first two tiers would normally need it, because those minimums are below 20%. The top tier requires 20% down, so insurance is not part of that picture.

For CMHC homeowner mortgage loan insurance, the purchase price must be below $1,500,000. That lines up with the top tier, where the minimum down payment is 20% at $1.5 million or more. How insurance is priced and paid depends on your lender and your situation, so ask your lender to walk you through it before you commit.

Using a gift from a relative, and newcomer rules

Traditional down payment sources for CMHC-insured mortgages include a non-repayable financial gift from a relative. The word non-repayable matters, because money you have to pay back is not the same as a gift. How a lender wants a gift documented is worth confirming with them, and your lawyer can also explain what paperwork to expect.

Newcomers have some specific rules under CMHC:

• Permanent residents can use all of CMHC's homeowner mortgage loan insurance products, with no minimum period of residency.
• Non-permanent residents need legal authorization to work in Canada, such as a work permit.
• A down payment from 5% applies, and at least one borrower or guarantor needs a credit score of at least 600.
• If you have limited Canadian credit, alternatives such as an international credit report may be supported.

Separate from financing, non-Canadians may face other rules when buying residential property in Ontario, such as the federal purchase ban and Ontario's Non-Resident Speculation Tax. It is worth getting advice on those before you sign anything.

Building your down payment with an FHSA and the HBP

Two registered plans can help first-time buyers. To open a First Home Savings Account (FHSA) you must be a resident of Canada, at least 18 (or 19 where that is the age of majority), and 71 or younger on December 31 of the year you open it. You must also be a first-time home buyer, meaning you have not lived in a qualifying home you owned or jointly owned as your principal residence in the current calendar year or the previous four. If you have a spouse or common-law partner, you also must not have lived in a home they owned or jointly owned as your principal residence in that same window.

FHSA participation room is $8,000 in the year you open your first account, with a lifetime limit of $40,000, and unused room may be usable the following year. A qualifying withdrawal is tax-free and does not have to be repaid, but only if every condition is met, including a written agreement to buy or build, and filing Form RC725 with the issuer. If a condition is not met at the time of withdrawal, the amount is taxable.

The RRSP Home Buyers' Plan (HBP) currently allows withdrawals up to $60,000, which you repay to your RRSP over up to 15 years. The FHSA and the HBP can be used together for the same qualifying home, as long as you meet all the conditions at the time of each withdrawal. Repayment timing can be more generous for some first withdrawals, so check the current CRA rules for your year.

What to do next

• Work out your target price range and calculate the minimum down payment using the tiers.
• Decide whether you will be under 20% down and ask your lender about mortgage loan insurance.
• If family is helping, get a clear written statement that the money is a gift and not a loan.
• If you are a newcomer, confirm your work authorization and credit history options with a lender.
• Check whether you are eligible for an FHSA or the HBP, and confirm the conditions before withdrawing.
• Budget for closing costs beyond the down payment, and have a real estate lawyer review your agreement.

If your situation is unusual, such as a gift with strings attached, a non-resident buyer, or a purchase near the $1.5 million line, a lawyer or accountant can confirm how the rules apply to you.

Frequently asked questions