"How much do I need to put down?" is the first question almost every buyer asks us. The answer depends on the price of the home, and it's not one flat percentage.
The short answer: at least 5% of the first $500,000, plus 10% of the portion between $500,000 and $1.5 million. Homes priced at $1.5 million or more need 20% down.
Here's what that looks like at real prices, and the other money you need to plan for.
The three tiers
These are the federal minimums, from the Financial Consumer Agency of Canada:
- $500,000 or less: 5% of the purchase price.
- $500,000 to $1.5 million: 5% of the first $500,000, plus 10% of the part above $500,000.
- $1.5 million or more: 20% of the purchase price.
The middle tier is the one that confuses people. You don't pay 10% of the whole price. You pay 5% on the first $500,000 and 10% only on the rest.
What it looks like at Vaughan prices
Using those rules:
- $500,000 home: 5% = $25,000 minimum.
- $1,000,000 home: $25,000 on the first $500,000, plus $50,000 on the next $500,000 = $75,000 minimum.
- $1,300,000 home: $25,000 plus $80,000 = $105,000 minimum.
- $1,500,000 home: 20% = $300,000 minimum.
That last jump is the big one. Crossing $1.5 million moves you from the tiered rule to a flat 20%, so it's worth knowing exactly where your budget sits before you start looking.
These are minimums. If you're self-employed or have a poor credit history, your lender may ask for more. And normally the minimum down payment has to come from your own funds.
Under 20%? You'll need mortgage loan insurance
If your down payment is less than 20%, you'll typically need mortgage loan insurance. It protects the lender, not you, in case payments stop.
- The premium ranges from 0.6% to 4.5% of the mortgage amount. The bigger your down payment, the lower the premium.
- You can add the premium to your mortgage or pay it up front. If you add it, you pay interest on it.
- In Ontario, provincial sales tax applies to the premium, and it can't be added to your mortgage. You pay that tax when you get your mortgage, so budget for it in cash.
Your lender arranges the insurance for you if you need it.
The money you need on top of the down payment
The down payment isn't the only cheque. Plan for these too:
- Closing costs of about 2% of the purchase price. Most of it is Ontario land transfer tax (about $22,500 on a $1.3 million home in Vaughan), plus legal fees, title insurance, a home inspection and adjustments for property tax the seller prepaid. Toronto buyers also pay a municipal land transfer tax, which roughly doubles the tax.
- First-time buyers can get up to $4,000 of the Ontario land transfer tax refunded. In Toronto, the city refunds up to $4,475 more. You must never have owned a home anywhere in the world and must move in within nine months.
Your deposit is part of your down payment
When your offer is accepted, you pay a deposit, usually about 5% of the price in the GTA, within 24 hours. It's held in trust by the listing brokerage and counts toward your down payment on closing.
So on a $1.3 million home, a deposit of around $65,000 is common, and that money needs to be ready to move the day your offer is accepted. Don't leave it locked in an investment that takes days to cash out.
Don't forget the stress test
Your down payment sets how much you need. The stress test sets how much you can borrow. Lenders check that you could still afford your payments at the greater of 5.25% or your mortgage rate plus 2%. That lowers your borrowing limit, which is why a pre-approval comes before house hunting, not after.
What this means for you
- Know your tier. Work out your minimum at the price you actually want to buy at, using the tiers above.
- Watch the $1.5 million line. Just over it, the minimum jumps to 20%.
- Budget for three things, not one: down payment, about 2% closing costs, and the PST on any mortgage insurance.
- Have your deposit ready before you make an offer.
- Get pre-approved first. It tells you what you can borrow and makes your offers stronger.
You can see the full process in our buyer guide and more quick answers in our buyer questions. If you're selling to buy, our cost to sell calculator shows what you'll walk away with for your next down payment.
Ready to start?
We'll help you work out your number and connect you with a lender to get pre-approved. Call or text 647-694-3109 or get a free home evaluation below.
Michael Barillari, Broker, RE/MAX Premier The OP Team, Brokerage.
General information only; talk to your lender/lawyer/accountant about your situation.