The Down Payment Playbook

The down payment is the single biggest hurdle between renting and owning, and it is also the part buyers get the most bad information about. This playbook walks through every legitimate source of a down payment in Canada, exactly how the rules work, and what your lender will actually ask to see.

It is written for buyers, with Ontario examples, and reflects the insured-mortgage rules in force since December 15, 2024. Your specific approval still depends on your income, credit, and the lender you choose.

Mortgage Squad Advisors is licensed in Ontario under FSRA #13737. When you are ready to see what you qualify for, you can start an application or run the affordability calculator at any point.

Canada does not use a single flat percentage. The minimum down payment is tiered by purchase price, and it climbs as the price goes up:

• 5% on the first $500,000 of the purchase price.
• 10% on the portion of the price from $500,000 up to $1,500,000.
• 20% (minimum) on homes priced at $1,500,000 or more, which must be financed without default insurance¹.

These tiers apply to owner-occupied homes with 1 or 2 units. An owner-occupied property with 3 or 4 units needs at least 10% down on the whole price².

So a $400,000 home needs $20,000 down (5%). A $700,000 home needs $45,000: that is 5% on the first $500,000 ($25,000) plus 10% on the next $200,000 ($20,000). A $1,600,000 home needs at least $320,000, because at $1.5 million or more the whole purchase falls under the 20% uninsured rule³.

Knowing your price band first tells you the real savings target. The affordability calculator can work backwards from a price to a required down payment.

The size of your down payment decides which of two worlds you are in. With less than 20% down, your mortgage is insured (often called high-ratio) and requires mortgage default insurance from CMHC, Sagen, or Canada Guaranty⁴. With 20% or more down, your mortgage is conventional and no default insurance is required.

Default insurance protects the lender, not you, if you stop paying. The premium is a percentage of the loan that rises as your down payment shrinks, and it is usually added to your mortgage balance rather than paid up front⁵. That trade-off is the cost of buying with a smaller down payment.

Insured mortgages often come with competitive rates because the lender's risk is covered, so a smaller down payment is not automatically a worse deal. The right choice depends on how much cash you can put down without draining your savings.

A gift from family is one of the most common and fully legitimate down payment sources in Canada. Insurers and lenders accept a non-repayable gift from a relative⁶ (typically parents, grandparents, or a sibling) as long as the money is a true gift.

The proof is a signed gift letter. It states the amount, the relationship between giver and recipient, and most importantly that the funds are a genuine gift and not repayable. That last point matters: if the money is secretly a loan, it changes your debt load and the lender cannot treat it as a down payment.

Expect the lender to also verify the gift has landed in your account, and to ask for a 90-day history once it is there (see the next section). A clean gift letter plus a clear paper trail is all that is usually needed.

Two registered accounts are built specifically to help Canadians save a down payment, and they can be used together.

The First Home Savings Account (FHSA) is the newer tool. Contributions are generally tax-deductible like an RRSP, and qualifying withdrawals to buy your first home come out tax-free like a TFSA, with no requirement to pay the money back. You can contribute $8,000 a year up to $40,000 in total⁷.

The RRSP Home Buyers' Plan (HBP) lets eligible first-time buyers withdraw up to $60,000 from their RRSP for a home⁸. Unlike the FHSA, the HBP is a loan to yourself: you must repay the withdrawn amount back into your RRSP over 15 years, or the unpaid portion is added to your taxable income. You can use both for the same home.

Because contribution room, withdrawal limits, and repayment timelines change over time, confirm the current figures with the CRA before you plan around them. Used well, these accounts can fund a meaningful share of your down payment.

Whatever the source, your lender has to confirm where the money came from. Because of Canadian anti-money-laundering obligations and their own source-of-funds policies, most lenders ask for a 90-day history of your down payment funds. The 90 days is standard lender practice rather than a single federal rule, and some lenders ask for more.

In practice that means recent account statements showing the money was yours and accumulated normally. Steady savings, a clearly documented gift, or a registered-account withdrawal all pass easily. What raises questions is a large, unexplained deposit that appears just before closing with no trail.

The simple rule: keep your down payment in one place for at least three months before you buy, and keep records for anything unusual. If a chunk of money lands late, be ready to document exactly where it came from.

Your down payment is not the only cash you need at the finish line. Closing costs are separate, due on or around closing day, and they catch a lot of first-time buyers off guard.

Budget roughly 1.5% to 4% of the purchase price for closing costs⁶. The largest piece in Ontario is usually land transfer tax, and buyers in the City of Toronto pay an additional municipal land transfer tax on top of the provincial one. Other typical costs include legal fees, title insurance, and a home inspection or appraisal.

First-time buyers may qualify for Ontario’s land transfer tax refund of up to $4,000⁹ and, in Toronto, a municipal rebate of up to $4,475¹⁰, so check your eligibility. If your mortgage is insured, the provincial sales tax on the insurance premium is also due in cash at closing in Ontario⁵. Plan to have the down payment plus closing costs available; running short on closing day can delay or derail a purchase.

Here is how it comes together. These are illustrative Ontario examples, not quotes.

• $450,000 condo (insured): minimum 5% down is $22,500. As a high-ratio mortgage it needs default insurance. Add an estimated 1.5%-4% in closing costs, roughly $6,750-$18,000, so plan for about $29,000-$40,000 in total cash before any first-time rebate.
• $750,000 home (insured): minimum down is $50,000, that is 5% on the first $500,000 ($25,000) plus 10% on the next $250,000 ($25,000). Closing costs of 1.5%-4% add roughly $11,250-$30,000, so budget around $61,000-$80,000 total.
• $1,600,000 home (conventional): minimum 20% down is $320,000 and no default insurance applies. Closing costs of 1.5%-4% add roughly $24,000-$64,000, so the cash needed is about $344,000-$384,000.

Notice how the cash requirement jumps at each price band. A gift, an FHSA, or the HBP can each fill part of these gaps, and they can be combined.

A down payment can come from your own savings, a non-repayable family gift with a signed gift letter, an FHSA, the RRSP Home Buyers' Plan, or a mix of all of them, as long as the source is clear and the 90-day history holds up. Once you know your price band, you know your real target.

When you are ready, run your numbers in the affordability calculator to see what price your savings support, then start an application to find out exactly what you qualify for. Mortgage Squad Advisors, FSRA #13737, is here to make the math easy.