Your down payment size affects how much you can borrow and what type of mortgage insurance you’ll need. Lenders use it to determine your loan-to-value ratio, which influences approval, rate, and insurance requirements.

Minimum down payment rules in Canada

  • 5% for homes under $500,000
  • 10% for the portion between $500,000 and $999,999
  • 20% for homes $1 million or more (no insurance allowed)

If your down payment is below 20%, your mortgage must be insured by CMHC, Sagen, or Canada Guaranty.

How your down payment affects pre-approval

A larger down payment can:

  • Increase your pre-approved amount
  • Reduce your monthly payment
  • Lower your mortgage insurance premium
  • Improve your debt ratios

Smaller down payments work too, but your lender may cap the maximum purchase price to keep you within affordability limits.

Read More: 5 Documents You’ll Need to Get Pre-Approved for a Mortgage in Canada

Example

If you’re buying a $600,000 home:

  • Minimum down payment = $35,000
  • Mortgage insurance applies because it’s under 20%
  • Higher down payment (say 15%) lowers the insured loan cost and boosts approval odds

Tips to strengthen your pre-approval

  1. Save regularly in a TFSA or HISA to increase your down payment faster.
  2. Get a gift from a family member with a proper letter.
  3. Pay down high-interest debts to improve your ratios.
  4. Compare lenders through an online broker like Homewise to see if you qualify for more.

FAQs

1. Does a higher down payment always mean better rates?

Not always, but it can help you qualify for better terms or lower insurance costs.

2. Can I use RRSP funds for my down payment?

Yes, through the Home Buyers’ Plan, up to $35,000 per person.

3. What if my down payment comes from a gift?

That’s fine. The lender just needs a gift letter confirming it’s not repayable.

4. Can my down payment be from borrowed funds?

Sometimes, if you have strong credit and the lender allows it.