Yes, many qualified buyers in Canada can purchase a home with as little as 5% down. However, the minimum down payment depends on the purchase price, and having the minimum amount saved does not automatically mean you will qualify for the mortgage.
Your income, debts, credit history, employment, property type, and other costs associated with buying a home will all affect your approval.
How Does a 5% Down Payment Work?
For a home priced at $500,000 or less, the minimum down payment is 5% of the purchase price.
For example:
- Purchase price: $400,000
- Minimum down payment: $20,000
- Mortgage before insurance: $380,000
A 5% down payment can make homeownership more accessible, especially for first-time buyers who may find it difficult to save 20% while also paying rent and other living expenses.
What If the Home Costs More Than $500,000?
For homes priced between $500,000 and $1.5 million, the minimum down payment is calculated in two parts:
- 5% of the first $500,000
- 10% of the portion above $500,000
For example, the minimum down payment on a $600,000 home would be:
- 5% of the first $500,000: $25,000
- 10% of the remaining $100,000: $10,000
- Total minimum down payment: $35,000
Homes priced at $1.5 million or more require at least 20% down because mortgage default insurance is not available at or above that purchase price.
Do I Need Mortgage Default Insurance With 5% Down?
Yes. When your down payment is less than 20%, you will typically require mortgage default insurance, sometimes called mortgage loan insurance. This insurance protects the lender—not the buyer—if the mortgage cannot be repaid.
The insurance premium is calculated as a percentage of the mortgage amount. It can usually be paid upfront or added to the mortgage balance, although adding it to the mortgage means you will also pay interest on that amount.
With an insured mortgage, qualified buyers may finance up to 95% of an eligible home’s purchase price.
Does the 5% Down Payment Have to Come From Savings?
Not necessarily. Acceptable down-payment sources may include:
- Personal savings
- Proceeds from selling another property
- A non-repayable financial gift from an immediate family member
- Certain other approved sources, depending on the lender and insurer
CMHC also allows some non-traditional down-payment sources for eligible borrowers and properties, although additional qualification requirements apply.
Your lender will need documentation showing where the money came from. Avoid moving large amounts between accounts without keeping clear records, as lenders must verify the source of your funds.
Can First-Time Buyers Purchase With 5% Down?
Yes. First-time buyers are not required to put 20% down, provided they meet the lender’s and mortgage insurer’s qualification requirements.
Buying with 5% down may allow you to enter the housing market sooner, but it also produces a larger mortgage balance and adds mortgage insurance to the overall cost. A larger down payment reduces the amount borrowed and may lower the total interest paid over time.
The right decision depends on your savings, monthly budget, purchase timeline, and comfort level.
Does Having 5% Saved Mean I Will Be Approved?
No. The minimum down payment is only one part of mortgage qualification.
A lender will also review factors such as:
- Your income and employment history
- Your credit history
- Existing debts and monthly obligations
- Property taxes and heating costs
- The mortgage stress test
- The type and condition of the property
- The source of your down payment
Some borrowers—such as those with weaker credit or less predictable self-employed income—may be asked to provide a larger down payment.
Getting pre-approved before shopping can help you understand both the mortgage amount you may qualify for and the monthly payment you can realistically manage.
Remember to Budget for Closing Costs
Your down payment is not the only money you will need.
Buyers should also prepare for expenses such as:
- Legal fees
- Home inspection costs
- Appraisal fees, when required
- Property tax adjustments
- Title insurance
- Moving expenses
- Utility setup
- Immediate repairs or furnishings
These costs are generally paid separately and should not be taken from the minimum down-payment funds unless sufficient additional money remains available.
Keeping an emergency fund after possession is also important. Using every dollar you have for the down payment could leave you financially vulnerable when an unexpected repair or expense occurs.
Is It Better to Put 5% or 20% Down?
Neither option is automatically right for everyone.
A 5% down payment may be suitable when:
- You want to buy sooner rather than spend several more years saving.
- Your income comfortably supports the mortgage payments.
- You have enough money for closing costs and emergencies.
- Buying now fits your long-term plans.
A 20% down payment may be preferable when:
- You want to avoid mortgage default insurance.
- You want a smaller mortgage and lower monthly payments.
- You can make the larger down payment without draining your savings.
- You are purchasing a property that is not eligible for insured financing.
The decision should be based on more than simply reaching the minimum requirement. A mortgage professional can compare the upfront and long-term effects of different down-payment amounts.
Find Out What You Can Afford
Buying with 5% down is possible for many Canadians, but the minimum down payment is only one part of the decision. The more important question is whether the mortgage, monthly payments, closing costs, and ongoing homeownership expenses comfortably fit your finances.
Allison Kehler-Tolley can review your income, savings, debts, and home-buying goals to help you understand how much down you may need and which mortgage options may be available. Contact Allison today to begin your mortgage pre-approval and create a clear plan for buying your next home.
