Average down payment on a house in Canada

by Richard Morrison
February 19, 2020
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Planning to buy a house in Canada? One of the first things you’ll need to figure out is how much money you’ll need for the down payment. This upfront amount is crucial for getting approved for a mortgage and securing your dream home.

Key Takeaway: The minimum down payment on a house in most of Canada is 5% of the first $500,000 of the purchase price, plus 10% of any amount over $500,000. However, averages are often higher, with many Canadians putting down 20% or more. Expect your down payment to be anywhere from $25,000 to $100,000 for a typical first home.

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Calculating Your Minimum Down Payment

When shopping for a mortgage, you’ll discover that lenders have minimum down payment requirements you must meet to get approved. This ensures you have enough equity in the home.

Here’s how it works in most provinces:

Less than $500,000: 5% down payment
$500,000 to $999,999: 5% of the first $500,000 plus 10% of the amount over $500,000
$1 million+: 20% down payment

So if you’re buying a $600,000 home, you’d need:

5% of $500,000 = $25,000
10% of $100,000 = $10,000
Total Minimum Down Payment: $25,000 + $10,000 = $35,000

Why People Often Put Down 20% or More

While 5% or 10% down is the minimum, you’ll get the best mortgage rates if you put down 20% or more.

Here are some key reasons why it pays to put down 20% if possible:

Avoid mortgage insurance – If your down payment is less than 20%, you’re required to get mortgage loan insurance which adds to your costs.
Lower mortgage rate – The more you put down, the lower risk you are to lenders. You can qualify for a better mortgage interest rate.
Lower monthly payments – With less to finance, your monthly mortgage payments will be lower with a larger down payment.
Less interest paid – Over the life of the mortgage, you pay exponentially less in interest with a bigger down payment.
Build equity faster – More down means faster equity growth in the early years of your mortgage.

Down Payment Tax Benefits

Putting down 20% also opens up beneficial tax deduction opportunities in some provinces:

RRSP withdrawal – You can withdraw up to $35,000 from your RRSP tax-free through the Home Buyer’s Plan to put toward your down payment.
First-time home buyer incentives – Programs like the First-Time Home Buyer Incentive help first-timers afford their down payments.

Pro Tip: Putting down at least 20% unlocks the most tax benefits and mortgage perks. But don’t drain all your savings – leave some cushion for closing costs and move-in needs.

Average Down Payments Across Canada

Now that you know the minimums, what are Canadians actually putting down on a house these days? Down payment averages vary widely across the country.

Here are some examples of typical down payments by region according to 2022 data:

British Columbia

Average down payment: 22%
Average amount: $159,000

Ontario

Average down payment: 20%
Average amount: $140,000

Alberta

Average down payment: 15%
Average amount: $75,000

Atlantic Canada

Average down payment: 15-20%
Average amount: $55,000-$75,000

As you can see, the national average is around 15-20% for a down payment, even though 5% is possible. Average amounts range from $55,000 to $159,000.

Factors That Influence Your Down Payment Amount

Your specific down payment will depend on your financial situation, home price, and location. Here are some of the key factors:

Credit Score

The stronger your credit, the lower down payment you may need. Good credit can qualify you for the minimum 5%. Weaker credit may mean needing 10-20% down.

Income

Higher income buyers often have more cash on hand for a down payment vs. lower income buyers. Consider your savings and income level.

Purchase Price

More expensive homes naturally require you put down more money. Aim to stay within your budget.

Location

In pricier markets like Toronto or Vancouver, higher down payments are more common. Research averages in your local market.

Existing Assets

If you have other assets like a car, investments or another property, you may be able to leverage these towards your down payment.

Creative Ways to Fund Your Down Payment

Not having enough cash on hand is the #1 obstacle for prospective home buyers. Here are some creative ideas for funding your down payment if your savings fall short:

Ask family members for a loan or gift
Withdraw or borrow from your RRSP
Take advantage of down payment assistance programs
Sell assets like stocks, a car, or other valuables
Delay other goals to focus on down payment savings

The key is starting your down payment fund as far in advance as possible. Give yourself 12-24 months to accumulate funds if you can.

Is a Large Down Payment Always Better?

While advantageous in many ways, jumbo down payments aren’t necessarily right for everyone. Here are a few pros and cons to weigh:

Pros

Lower mortgage payment
Less interest paid long-term
Build equity faster
Stronger borrowing power
Unlock tax deductions

Cons

Longer to accumulate funds
Less cash leftover after closing
Delay buying and keep renting
Sacrifice other goals/priorities

Carefully consider your full financial picture. In some cases, putting the minimum down to buy sooner may be a better option than waiting years to save a large amount.

How Much House Can I Afford?

Crunching the numbers on a mortgage affordability calculator can give you a rough idea of how much home you can realistically afford based on your income, debts, down payment savings, and the going mortgage rates in your area.

Be conservative – it’s better to underspend than become “house poor” by overextending your budget. And remember, the purchase price isn’t the only expense – property taxes, maintenance and renovations will eat into your monthly housing budget too.

Major Point

The minimum down payment is usually 5% of the first $500,000, plus 10% of any amount above $500,000.
However, 20% down has many advantages and is considered ideal.
Actual average down payments range from 15-22% nationwide.
Factors like income, assets, credit score and location determine your amount.
Get creative if you’re short on cash – borrowing from family or your RRSP can help.
Make sure to run the numbers conservatively so you don’t become “house poor”.

With some strategic planning and saving, you can accumulate sufficient down payment funds to buy the home of your dreams in Canada!

Frequently Asked Questions

Q: What is a down payment?

A: A down payment is a portion of the total cost of a house that you pay upfront when you purchase a property. It is usually expressed as a percentage of the purchase price.

Q: How much is the average down payment on a house in Canada?

A: The average down payment on a house in Canada is around 20% of the purchase price. However, this can vary depending on several factors such as the location, the price of the property, and the type of mortgage loan you are taking.

Q: Do I need to save for a down payment?

A: Yes, you generally need to save for a down payment on a house. Most lenders require a down payment as a part of the home buying process. It shows your commitment and reduces the risk for the lender.

Q: How much should you put as a down payment?

A: The amount you should put as a down payment depends on various factors such as your financial situation, the price of the home you intend to buy, and the mortgage loan you are taking. It is generally recommended to aim for at least 20% of the purchase price to avoid paying mortgage default insurance.

Q: Can I buy a house with a higher down payment?

A: Yes, you can buy a house with a higher down payment if you have the financial means to do so. A higher down payment will result in a lower mortgage loan amount and may also help you secure a better interest rate.

Q: What are the requirements for a house down payment in Canada?

A: The requirements for a house down payment in Canada can vary depending on the lender and the type of mortgage loan you are taking. The minimum down payment required is typically 5% of the purchase price for a home priced up to $500,000. For homes priced over $500,000, the minimum down payment is 5% on the first $500,000 and 10% on any amount over $500,000.

Q: What is mortgage default insurance?

A: Mortgage default insurance, also known as mortgage loan insurance, is a type of insurance that protects the lender in case the borrower defaults on the mortgage loan. It is required for home buyers who make a down payment of less than 20% of the purchase price.

Q: How do I calculate a down payment?

A: To calculate a down payment, you need to determine the percentage of the purchase price you want to put down and multiply it by the price of the home. For example, if you want to put down 20% on a $300,000 home, your down payment would be $60,000.

Q: How much do I need for a down payment on a home in Canada?

A: The amount you need for a down payment on a home in Canada depends on the price of the property you want to buy and the type of mortgage loan you are taking. The minimum down payment required is generally 5% of the purchase price, but it is advisable to aim for at least 20% to avoid mortgage default insurance.

Q: Can I put a large down payment on a house?

A: Yes, you can put a large down payment on a house if you have the financial means to do so. Putting a larger down payment will reduce your mortgage loan amount and can also help you save on interest payments over the life of the loan.

How much down payment do I need on a $500,000 house?

For a home priced at $500,000 or below, you would need a minimum down payment of 5% of the purchase price. So in this case, 5% of $500,000 is $25,000.

Can I put down less than 20% on a house in Canada?

Yes, it’s possible to put down less than 20% when buying a house in Canada. The minimum down payment is 5% on the first $500,000. However, you may get higher interest rates and have to pay mortgage loan insurance if less than 20% down.

Can I use my RRSP for a down payment on a house?

Yes, through the Home Buyer’s Plan you can withdraw up to $35,000 from your RRSP tax-free if you are a first-time home buyer. This can be an excellent source of down payment funds. Keep in mind that you will need to repay the amount over time.

What’s the maximum down payment I can make?

There’s no maximum down payment set by law in Canada. You can legally put down as much as you want upfront if you have the funds – even 100% if you can pay cash. However, most experts recommend putting down 20-25% at most and investing leftover funds instead of tying them up in home equity.

Conclusion

When it comes to buying a home in Canada, it is important to consider the down payment required. Typically, if you want to buy a home and your down payment is less than 20% of the purchase price, you will need to pay a minimum amount determined by the Canadian Mortgage and Housing Corporation (CMHC). The minimum down payment would be 5% for the first $500,000 of the Canadian real estate, and 10% for any amount above $500,000.

However, it is worth noting that the higher the down payment you make, the less you’ll have to borrow from your mortgage lender. This means that the monthly payments for your house will be lower.

For instance, if the average home price in Canada is $500,000, first-time homebuyers would need to put down a minimum down payment of $25,000 or 5%. Of course, you can always choose to make a larger down payment if you can afford it. In fact, it is recommended to make a down payment of 20% or more if possible, as it can help you avoid paying for mortgage default insurance.

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Ready to turn your real estate dreams into reality? Contact Richard Morrison, Vancouver’s top realtor with 20+ years of experience. As a Medallion Club member and RE/MAX Hall of Fame award winning agent, he’s the expert you need on your side. Whether buying, selling, or investing, Richard’s personalized approach and deep market insights ensure a successful transaction. Reach out to Richard today at (778) 900-2235 and make your real estate journey seamless and rewarding.

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