Mortgage Down Payment Calculator
A down payment is a lump sum payment made when you purchase a home. Make sure to have this amount saved before finding a Canadian real estate agent. The difference between the purchase price of the home and your down payment will become the amount of your mortgage. The minimum down payment required depends on your home's purchase price.
Down Payment Calculator
Note: In Ontario, the CMHC premium is subject to an additional 8% RST. Quebec charges a 9% tax. Saskatchewan charges 6% PST on mortgage default insurance premiums.
Mortgage Down Payment Guide
What is the minimum down payment required for a mortgage?
Your minimum down payment depends on the purchase price of your property.
- If your purchase price is under $500,000, your minimum down payment is 5% of the purchase price.
- If your purchase price is $500,000 to $1,499,999, your minimum down payment is 5% of the first $500,000, plus 10% of the remaining portion.
- If your purchase price is $1,500,000 or more, your minimum down payment is 20% of the purchase price.
| Purchase Price | Minimum Down Payment (% of Purchase Price) |
|---|---|
| Under $500,000 | 5% |
| $500,000 to $1,499,999 | 5% of the first $500,000, then 10% of remainder |
| $1.5 million and up | 20% |
Is making just the minimum down payment for a mortgage bad?
The amount of your down payment affects what opportunities you’ll have for your mortgage. With the minimum down payment of 5% for properties under $500,000, you will have a larger mortgage and have to pay a CMHC insurance premium of up to 4%. While you will have to pay less upfront today, you will have to pay more in interest over the long run compared with making a higher down payment at the same interest rate.
Another disadvantage shows up in the mortgage stress test where you must show that you can still afford mortgage payments even if the interest rate rises to the mortgage qualifying rate. If you have a larger outstanding mortgage owing, your monthly mortgage payments could be significantly higher. Having less equity in your home also means that it will be more difficult to qualify for a mortgage refinance or products such as a home equity line of credit (HELOC), which have loan-to-value requirements.
On the other hand, a down payment of 20% or greater gives mortgage lenders more flexibility in case you default on your mortgage or property prices go down. As a result, you can avoid paying for mortgage insurance.
Your mortgage lender may require you to make a higher down payment in order to qualify for a mortgage from them. This can be due to a variety of reasons, such as if you are self-employed or if you have a poor credit history. Newcomers to Canada, such as recent immigrants, may qualify for a mortgage even without a Canadian credit history. Special programs for newcomers may require a higher down payment, however.
Did you know? A smaller down payment can lead to a lower mortgage rate
Mortgages with a down payment of less than 20%, or high-ratio mortgages, usually have lower mortgage rates than low-ratio mortgages with a down payment of 20% or higher. This is because borrowers will pay for mortgage insurance (e.g. CMHC mortgage insurance), which offsets most of the risk to the lender. As a result, lenders often offer the lowest mortgage rates for low or minimum down payment mortgages.
Should I save for a 20% down payment?
If you can afford it, making a down payment of 20% or more will allow you to avoid having to pay for mortgage default insurance, and it can give you more flexibility in your financing options.
Making a down payment of less than 20% will limit your housing options in certain cities, such as Vancouver’s housing market and Toronto, where the average price of a home is around $1 million. If you require a longer amortization period, you will need a down payment of 20% or greater.
In addition to a down payment, there are also closing costs that you will need to pay upfront. These costs, such as land transfer tax, legal fees, and moving expenses, can add up to thousands of dollars.
If you are a professional real estate investor, however, you may want to minimize your down payment in order to maximize your return. For example, those pursuing the BRRRR method are looking to use as little of their cash as possible to buy rental properties. You can find the potential return of your real-estate investment using our cap rate calculator.
How Much Mortgage Can I Afford?
The old rule of thumb—that you can borrow about four times your annual gross income and spend no more than 32% of it on housing—remains a rough starting point. In reality, Canadian mortgage eligibility today depends on several regulatory tests. Borrowers must qualify under the federal stress test (the higher of their contract rate + 2% or 5.25%) and keep debt service ratios within limits (about 39% GDS and 44% TDS). In addition, banks face portfolio-level expectations from OSFI to limit the proportion of mortgages exceeding 4.5× borrower income. While this does not bar any single borrower from taking a larger loan, it constrains how many such loans lenders can issue. These layered rules mean affordability calculations are far more complex than a simple income multiple. A quick way to check is to use a mortgage payment calculator to see how much payments are required every month.
You can find out how much you can afford by using our mortgage affordability calculator.
After the mortgage stress test was introduced in October 2016, and later revised and expanded in January 2018, buyers’ affordability decreased significantly. The mortgage stress test aims to ensure that homeowners in Canada can still meet their mortgage payments if the interest rate rises. This helps to protect the Canadian economy, specifically the real estate sector, against any future financial stress. You need to show that the monthly mortgage payments still fit into your monthly income by using the greater interest rate of your mortgage rate plus 2% or the stress test qualifying rate of 5.25%. To use your current annual income as the base, you must have passed the probation period, which means you have been in the job for at least three or six months.
Try out the mortgage stress test using our stress-test calculator.
Down Payment Assistance Programs
Some provincial and municipal governments offer financial assistance to first-time home buyers. This can be in the form of transfer tax rebates, income tax credits, or direct cash payments. Some programs include down payment assistance, which may be in the form of an interest-free loan that will cover the down payment for a new home purchase.
For example, New Brunswick’s Home Ownership Program provides a loan of up to $75,000 for first-time homebuyers with an income under $40,000. Manitoba’s Rural Homeownership Program provides a forgivable loan of up to 25% of the purchase price of select rural properties from the provincial government. Nova Scotia’s Down Payment Assistance Program provides an interest-free loan of up to 5% of the purchase price of a home (up to $28,500 in Halifax Regional Municipality and $25,000 for the rest of the province) to cover the minimum down payment.
Some homeowners finance their down payment by contributing to their TFSA. You can use investment calculators like our GIC calculator to predict your future down payment size. If you are selling stocks to finance your down payment, make sure to use Norbert's Gambit to reduce exchange rate fees.
CMHC Insurance
Mortgage default insurance, also known as Canada Mortgage and Housing Corporation (CMHC) insurance, protects your mortgage lender in the event that you default on your mortgage. Under Canadian law, you must purchase CMHC or private mortgage insurance if your down payment is below 20%. Alternative mortgage default insurance providers are Canada Guaranty and Genworth/Sagen.
Only properties with a purchase price below $1.5 million are eligible for CMHC insurance. This means you can make a down payment as low as 5% for properties less than $500,000. If your home’s purchase price exceeds $1.5 million, you must make a down payment of 20% or greater.
With CMHC insurance, a mortgage’s amortization period for a repeat buyer purchasing a resale property can also not be over 25 years. The amortization period for first-time buyers or new home purchasers can be up to 30 years. If you wish to have a longer amortization period, your down payment must be 20% or more
How much does CMHC insurance cost?
Your CMHC mortgage loan insurance premium is calculated as a percentage of your mortgage amount (loan amount), not the purchase price. The rate depends on your down payment (loan-to-value): for high-ratio mortgages (less than 20% down), premiums are 4.00% (5%–9.99% down), 3.10%(10%–14.99% down) and 2.80% (15%–19.99% down). If the down payment is non-traditional, the 95% LTV band is 4.50%. Some lenders also insure low-ratio mortgages (20%–35% down); those premiums range from 0.60%–2.40%. You can add the premium to your mortgage.
Using a CMHC insurance calculator can help you estimate your premium and any applicable sales tax. PST/QST (or similar) on the mortgage default insurance premium applies only in Ontario, Québec, Manitoba and Saskatchewan,, and it cannot be added to your mortgage—it’s paid at closing Manitoba eliminated its RST on mortgage default insurance effective July 1, 2020.
How do I pay for CMHC insurance?
Your mortgage default insurance premium is remitted by the lender to the insurer, but the cost is almost always passed on to you. Most borrowers add the premium to the mortgage (increasing the regular payment slightly), though some lenders let you pay it upfront as a lump sum. Only in limited cases does the lender absorb the cost—for example, when it purchases low-ratio ‘portfolio’ insurance on its own; in those cases you won’t see a separate premium, though the rate may reflect the cost.
How can I minimize CMHC insurance premiums?
By putting a minimum down payment of 20% you can avoid paying CMHC insurance. If you put a down payment of less than 20% on your new home, your mortgage is considered a high ratio loan (ratio of loan to home value) and consequently you must take out CMHC insurance to cover the lender if you default on the mortgage. CMHC insurance premiums can run into the thousands of dollars.
For example, on a $500,000 home, here are the insurance premiums for various down payment percentages.
| Down Payment | CMHC Insurance Premium |
|---|---|
| 5% ($25,000) | $19,000 |
| 10% ($50,000) | $13,950 |
| 15% ($75,000) | $11,900 |
| 20% ($100,000) | $0 |
Using a down payment of 20% or more exempts you from paying CMHC insurance. However, mortgage lenders may require you to get CMHC insurance even if you make a down payment greater than 20%, depending on marketability of your property as well as your financial situation. Lenders may purchase mortgage default insurance, but they generally pass the cost on you by putting it on the mortgage rate, and that can increase your monthly payment slightly. That is a reason why the mortgage rate that you can get for a 35% down payment is lower than for a 20% down payment, since lenders need to pay less CMHC mortgage default insurance.
Disclaimer:
- Any analysis or commentary reflects the opinions of WOWA.ca analysts and should not be considered financial advice. Please consult a licensed professional before making any decisions.
- The calculators and content on this page are for general information only. WOWA does not guarantee the accuracy and is not responsible for any consequences of using the calculator.
- Financial institutions and brokerages may compensate us for connecting customers to them through payments for advertisements, clicks, and leads.
- Interest rates are sourced from financial institutions' websites or provided to us directly. Real estate data is sourced from the Canadian Real Estate Association (CREA) and regional boards' websites and documents.