Minimum Down Payment Rules in Ontario and CMHC Mortgage Insurance Explained

One of the first numbers every first-time buyer in Ontario lands on is the down payment. How much do you actually need? The answer depends on the purchase price, and the rules are set federally by the Office of the Superintendent of Financial Institutions (OSFI) and the Department of Finance — not by the province. Understanding the tiers, the mandatory insurance that applies below a certain threshold, and the cost of that insurance is essential to budgeting accurately for your first purchase.

The Minimum Down Payment Tiers

As of writing, Canadian federal rules set the minimum down payment for owner-occupied residential properties as follows — verify the current thresholds with your lender or CMHC, as the federal government has adjusted them in recent years:

• Homes priced up to a set lower threshold: the minimum down payment is 5% of the purchase price.
• Homes priced between the lower and upper threshold: the minimum is 5% on the lower portion and 10% on the remainder above the threshold.
• Homes priced above the upper threshold: mortgage loan insurance (CMHC) is not available, so a minimum of 20% is required. These are called conventional mortgages.

Because Ontario — particularly the Greater Toronto Area — has some of the highest average home prices in Canada, many buyers find themselves in the middle or upper tier. Check the current thresholds (they are set in federal regulation) to see where your target purchase price falls.

What Is Mortgage Loan Insurance (CMHC)?

Any purchase with a down payment of less than 20% requires mortgage loan insurance (commonly called CMHC insurance, after the Canada Mortgage and Housing Corporation, which is one of three approved insurers along with Sagen and Canada Guaranty). This insurance protects the lender — not you — if you default on the mortgage.

Despite protecting the lender, you pay the premium. The premium is added to your mortgage balance (it is not paid upfront in cash), meaning you finance the insurance cost over the life of the mortgage and pay interest on it.

Why Does It Exist?

Mortgage loan insurance allows lenders to offer lower down payment mortgages with confidence, because the insurer covers the lender's loss in a default situation. It is what makes 5%-down home ownership possible in Canada at all. Without it, lenders would require larger down payments to manage their own risk.

How the Premium Is Calculated

The insurance premium is calculated as a percentage of the insured mortgage amount (the purchase price minus your down payment). The percentage rate increases as your down payment decreases — the less you put down, the higher the premium rate.

As of writing, the premium rates are set by CMHC and approved insurers and are publicly available on their websites. Verify the current rates, as they are subject to change. As a general structure (not citing current specific figures):

• The lowest premium rate applies to down payments closest to 20%.
• The highest premium rate applies to the minimum 5% down payment.

Example (illustrative, not current figures): If you borrow $500,000 with a 5% down payment and the applicable premium rate is 4%, the premium is $20,000 — added to your mortgage, making the insured amount $520,000. You then pay interest on $520,000 for the life of the amortization.

HST on the Insurance Premium

The mortgage insurance premium itself is subject to Ontario's provincial portion of HST (8%). Unlike the premium, which is added to the mortgage, the HST portion must be paid in cash at closing. It is a real line item in your closing costs.

Your lawyer will show it on the statement of adjustments. Make sure your budget accounts for it.

Amortization Limits for Insured Mortgages

As of writing, insured mortgages (less than 20% down) have a maximum amortization period — the total number of years over which you repay the mortgage. Verify the current limit with your lender, as the federal government has adjusted maximum amortization for insured mortgages in recent budgets. Longer amortization reduces your monthly payment but increases total interest paid over the life of the loan.

Conventional mortgages (20% or more down) may have longer amortization options, depending on the lender's products.

The 20% Threshold: Conventional vs. High-Ratio

Putting 20% or more down:

• Eliminates the mortgage loan insurance requirement entirely.
• Is called a conventional mortgage (or uninsured mortgage).
• Allows for potentially longer amortization.
• May qualify for slightly different rate products.

Saving to 20% is meaningful, but in markets like Toronto or the GTA, the difference between 5% and 20% on an $800,000 home is $120,000. For many first-time buyers, reaching 20% while paying rent in Ontario is not realistic in a short timeframe. The insurance program exists precisely for this reason.

Gifts and Other Down Payment Sources

Lenders have specific rules about the source of your down payment:

• Your own savings are the cleanest source and require 90-day bank statements.
• Gifts from immediate family members are accepted with a signed gift letter confirming the money is not a loan. The definition of "immediate family" varies by lender — confirm.
• RRSP Home Buyers' Plan withdrawals are accepted and common (see the HBP article for rules).
• First Home Savings Account (FHSA) withdrawals are also accepted.
• Borrowed funds (personal loans, lines of credit, cash advances) are generally not acceptable as a down payment for insured mortgages.

Frequently asked questions