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Mortgage Down Payment in Canada

Your guide on how to finance a mortgage down payment.

Mortgage down payment

A mortgage down payment is the money you commit to the purchase of a property, paid upfront. It is expressed as a percentage of the property price, with 5% being the minimum requirement. For mortgage down payments of less than 20%, the buyer must purchase a default insurance, which is normally added to the mortgage amount. Premiums are calculated as a percentage of the property price and vary for mortgage down payments of 5% - 9.99%, 10% - 14.99% and 15% - 19.99%. The greater the mortgage down payment, the less of an insurance premium you’ll have to pay.

Different property values have distinct mortgage down payment requirements. For example, a home valued at less than $500,000 must have a down payment of 5%; a property costing between $500,001 and $999,999.99 required a 10% down payment on the portion above $500k; and a property valued at more than $1 million must have a down payment of at least 20%.

Traditional mortgage down payment sources

  1. Personal savings: The most common source of mortgage down payments is from savings. This can include money saved in chequing/savings accounts, Tax Free Savings Accounts (TFSAs), GICs, stocks or other types of investments.
  2. RRSP: You may withdraw up to $35,000 from your RRSP as a first-time homebuyer. The RRSP Home Buyers’ Plan lets you withdraw the money tax free, as long as the full amount is repaid back into the plan within 15 years. To qualify, the funds must be in your RRSP for at least 90 days. If you are a first-time homebuyer and have available contribution room, it could make sense to use your mortgage down payment savings to make an RRSP contribution. Since you’ll be purchasing a property, you will be able to withdraw the funds from your RRSP for your mortgage down payment, while also receiving a refund as a result of your contribution.
  3. Funds borrowed against proven assets
  4. Sweat equity (<50% of minimum required equity) for self-constructed property
  5. Land unencumbered
  6. Proceeds from the sale of another property
  7. Non-repayable gift from immediate relative: You can use funds that are given to you as a gift from your parents, grandparents or siblings. A gift letter will have to be signed by the family member providing the gift that confirms that the money will not have to be repaid.
  8. Equity grant (non-repayable grant from federal, provincial or municipal government
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