Down Payments, CMHC Insurance, and the 20 Percent Myth

One of the most persistent myths in Canadian real estate is that you need a twenty percent down payment to buy a home. You do not. The rules are tiered, and understanding them can move your purchase up by years.

For a home priced up to five hundred thousand dollars, the minimum down payment is five percent. For homes above that, you need five percent on the first five hundred thousand and ten percent on the portion above it, up to a limit of one and a half million dollars. Homes priced at one and a half million or more require twenty percent down and cannot be insured. These thresholds have changed in recent years, so always confirm the current figures.

If you put down less than twenty percent, your mortgage is insured, most often through CMHC. Here is the part people miss: this insurance protects the lender, not you. Because the lender is protected, they are willing to lend to you with a smaller down payment. The premium is added to your mortgage and paid over time, so it raises your balance slightly.

Putting twenty percent down avoids the insurance premium and lowers your payment, which is genuinely valuable. But waiting years to save that much while prices and rents keep moving has its own cost. For many buyers, entering the market sooner with an insured mortgage builds equity that would otherwise go to a landlord. There is no single right answer, only the one that fits your numbers and timeline.

You can buy in Canada with as little as five percent down on lower priced homes. Less than twenty percent simply means an insured mortgage with a premium that protects the lender. Weigh the premium against the cost of waiting. A mortgage professional can show you the payment at different down payment levels so the trade off is concrete.