To purchase a home in Canada, you need a minimum of 5% downpayment. That’s 5% of the price you pay for the home if your purchase is $500,000 or less. For instance, for a $400,000 home, you need a $20,000 downpayment.

What if the house you want is more than $500,000? Good question. Because the rules change. For any home over $500,000 but less than $1 million, you need 5% on the first $500,000… which is always going to be $25,000. And then you’re going to need ten per cent for any amount over that.

So if your house price is $650,000, you’ll need your $25,000 plus ten percent of the extra $150,000… which is $15,000.That means you’re going to need to save up $40,000 for your downpayment.

If your purchase price is $1 million or more, a minimum 20% downpayment is required.

These minimum downpayment amounts are Government of Canada rules, and they’re designed to maintain
a good, stable housing market. And that’s why there is another important government requirement. If your downpayment is between 5% and 20%, it’s also a rule that you have “default mortgage insurance.” The premium is almost always added to your mortgage amount. This insurance is there to protect the lender.

Here’s an example, if your purchase price is $400,000 and you have 5% down, your mortgage amount is $380,000. The mortgage insurance premium will be 4% percent or $15,200, which is then added to your mortgage, bringing your total mortgage amount to $395,200. The insurance premium declines to 3.1% (at 10% down) and 2.8% (at 15% down). If you’ve saved up more than 20% of the purchase price, then there’s no premium, because you’ve got lots of equity in the house as a buffer if anything goes wrong. Having 20% downpayment is a good goal, but today, most first-time homebuyers are purchasing their homes with the minimum required downpayment.