Buying a House With Less Than 20% Down

For a lot of buyers, the idea of saving up 20% before getting into the market can feel out of reach. The good news is—you don’t need that much. A very large percentage of homebuyers purchase with less than 20% down.

Minimum Down Payment Rules

Here’s how the minimum down payment works in Canada:

• 5% on the first $500,000 of the purchase price

• 10% on the portion between $500,000 and $1.5 million

• Homes over $1.5 million aren’t eligible for default insurance, so you’ll need at least 20% down

Example 1 – $450,000 purchase price:
5% of $450,000 = $22,500 down payment

Example 2 – $850,000 purchase price:

• 5% on the first $500,000 = $25,000

• 10% on the remaining $350,000 = $35,000
  Total down payment = $60,000

What Happens When You Put Less Than 20% Down

If your down payment is under 20%, your mortgage needs to be insured by one of the three mortgage insurers: CMHC, Sagen, or Canada Guaranty. The insurance protects the lender, not the borrower, and the premium is added to your mortgage.

Here’s what the premiums look like:

• 5% down: 4.00% of the mortgage amount

• 10% down: 3.10%

• 15% down: 2.80%

In some cases, the premium can be higher. Certain products or programs—like a 30-year insured amortization or a borrowed down payment—can increase the premium above the standard rates.

Pros and Cons of Buying With Less Than 20%

Pros:

• You can get into the market sooner

• Keeps more cash in your pocket for closing costs or renovations

• Insured mortgages often come with lower rates

Cons:

• You’ll pay an insurance premium

• Slightly higher monthly payment

• You start with less equity in the home

Not Just for First-Time Buyers

A common misconception is that this option is only for first-time homebuyers. That’s not the case.

Even if you’ve owned before—or currently do—you can still put as little as 5% down as long as:

• The property will be your primary residence

• You qualify based on income, credit, and debt

• The purchase price is below $1.5 million

This makes it an accessible option for both new buyers and people relocating, upsizing, or downsizing.

FAQ

Can I still get a good rate with 5% down?
Yes. In fact, insured mortgages often qualify for the best rates available.

Can I use a gifted down payment?
Yes—as long as the gift comes from an immediate family member and is documented properly.

What if I’m buying a second home or rental property?
A second home may qualify with 5% down, but rental properties require at least 20% down.

Do I have to pay the insurance premium upfront?
No, the premium is typically rolled into the mortgage and paid off over time.

Final Thoughts

Buying with less than 20% down is a standard option and one that helps many people get into the market sooner.