Buy a House With Just 5% Down
Yes, you can buy a house in Canada with a small down payment — with one correction. Five percent is not 5% of the whole price. It is 5% of the first $500,000, plus 10% of everything above that, up to $1,499,999. An $800,000 home needs $55,000 down, not $40,000, and a $1.2 million home needs $95,000. This post shows the real math at GTA prices, what mortgage insurance adds, and how to choose between buying at the minimum and waiting for 20%.
The 5% Rule — and the Part the Ads Leave Out
Canada's minimum down payment is a tiered formula, updated on December 15, 2024, and any guide still describing a $1 million ceiling is out of date. At $500,000 or less, the minimum is 5% of the price. From $500,001 to $1,499,999, it is 5% of the first $500,000 — $25,000 — plus 10% of the amount above $500,000. At $1,500,000 or more, the minimum is 20% of the full price.
The reason is insurance. A mortgage with less than 20% down must be insured, and insured mortgages are now available on homes priced under $1.5 million — the insured cap, raised from $1 million in December 2024. At or above $1.5 million insurance is unavailable, which is why the full 20% is required there.
The practical effect: your effective percentage rises with the price. At $500,000 you are truly at 5%. At $800,000, the $55,000 minimum is about 6.9% of the price. At $1.2 million, $95,000 is about 7.9%. A small down payment is still the only realistic route in for many GTA buyers — just plan with real numbers, not the slogan. Context: in September 2026 the GTA average price was $1,006,409 and the benchmark was $917,600, so most GTA purchases sit in the tiered part of the formula. Brampton averaged $854,322, Toronto $1,034,320, and GTA condos $605,257.
Minimum Down Payment at $500K, $800K, $1M and $1.2M
Here is the formula at four price points you will actually see in the GTA. Check the logic yourself: 5% of the first $500,000, plus 10% of whatever is left.
| Home price | Calculation | Minimum down payment | Mortgage before insurance |
|---|---|---|---|
| $500,000 | 5% of $500,000 | $25,000 | $475,000 |
| $800,000 | $25,000 + 10% of $300,000 | $55,000 | $745,000 |
| $1,000,000 | $25,000 + 10% of $500,000 | $75,000 | $925,000 |
| $1,200,000 | $25,000 + 10% of $700,000 | $95,000 | $1,105,000 |
Two cash points ride along. First, your deposit is due shortly after your offer is accepted and forms part of this down payment — not extra, but due early, so the first chunk must be accessible immediately. Second, on a standard insured mortgage the minimum must come from your own savings or a documented gift from immediate family. It cannot be borrowed; borrowed-down-payment products are a different structure, with the loan payment counted against you.
You must also qualify at the stress-test rate: the higher of your contract rate plus 2%, or 5.25%, with housing costs inside a 39% Gross Debt Service ratio and total debts inside a 44% Total Debt Service ratio. An insured mortgage requires a minimum credit score of 600, with 680 or higher generally needed for prime rates. Reaching the down payment is step one; passing those ratios is step two.
What CMHC Insurance Adds (and the Ontario Tax on It)
Put down less than 20% and your mortgage must carry default insurance, from CMHC, Sagen, or Canada Guaranty. Be clear on what it is: the insurance protects the lender, not you. You pay the premium, and in exchange the lender offers you a mortgage with a small down payment at competitive rates.
The premium is a percentage of your mortgage, set by how much you put down. On a 25-year amortization: 4.00% at 5% to 9.99% down, 3.10% at 10% to 14.99%, and 2.80% at 15% to 19.99%. The closer you get to 20%, the cheaper it is — and at 20%, it disappears.
Run it on the $800,000 example. The $55,000 down payment is about 6.9% of the price, placing you in the 4.00% band. The mortgage before insurance is $745,000, so the premium is 4.00% of $745,000: $29,800. It is normally added to your balance, bringing the total to $774,800, and you pay interest on it over the mortgage's life. Then comes the cost most guides forget: Ontario charges 8% PST on the premium. On $29,800 that is $2,384, and unlike the premium, the tax cannot be added to your mortgage — it is cash at closing. At $1.2 million, the same logic gives a premium of $44,200 on the $1,105,000 mortgage, plus $3,536 of PST in cash.
Budget these alongside your other closing costs, which total 1.5% to 4% of the price: land transfer tax of $12,475 on an $800,000 Ontario purchase, or $24,950 gross in Toronto where a municipal tax mirrors the provincial one, plus legal fees of $1,500 to $3,000, title insurance of $250 to $500, an inspection at $400 to $700, and an appraisal at $300 to $500.
30-Year Amortization: Lower Payment, Higher Premium
Since December 15, 2024, certain insured buyers can stretch their amortization to 30 years instead of 25, spreading the balance over more payments and lowering the monthly amount. Eligibility is narrower than the headlines suggest: first-time buyers and buyers of newly built homes, on insured mortgages only. A repeat buyer purchasing a resale home should plan on 25 years.
It is not free. The 30-year option adds a surcharge of 0.20 of a percentage point to the insurance premium. On the $800,000 example, the premium rate becomes 4.20% instead of 4.00% — $31,290 instead of $29,800, an extra $1,490 added to your balance, before the extra years of interest are counted. Compare the 25-year and 30-year payments side by side, weigh the premium difference, and use the longer amortization as a deliberate monthly-payment tool, not a default.
5% Down vs Waiting for 20%: The Real Math
Waiting until you have 20% down avoids insurance entirely — no $29,800 premium on the $800,000 example, no 8% PST on it, and a smaller mortgage. Those are real savings. But waiting has costs too, and honest math looks at both sides.
On an $800,000 home, moving from the $55,000 minimum to 20% — $160,000 — means saving an additional $105,000 while continuing to pay rent. How long that takes depends on your household, and prices can move either way meanwhile. In September 2026 GTA prices were down 5.1% year over year and homes took 51 total days to sell, so today's market does not punish patient buyers the way a rapidly rising market does. That favours waiting if you are close to 20% and can reach it in a reasonable time.
Buying at the minimum, meanwhile, gets you into the home now, with payments building equity instead of rent. There is also a middle option many buyers miss: put down more than the minimum without waiting for the full 20%. Crossing into the next premium band cuts your insurance rate — 3.10% at 10% down, 2.80% at 15% — so even a partial step up saves real money. Decide on your numbers and your realistic saving timeline, not on the slogan.
How to Reach the Minimum Faster: FHSA + HBP + Gifts
Open a First Home Savings Account first. It allows $8,000 a year, to a $40,000 lifetime limit: deductible contributions, a tax-free qualifying withdrawal, and no repayment. Unused room carries forward by up to $8,000 into a following year, but room only starts once the account is opened — opening it this year, even with a small deposit, beats opening it in your buying year.
If you have RRSP savings, the Home Buyers' Plan lets you withdraw up to $60,000 per person, $120,000 per couple, for a first home, provided the funds have been in the RRSP at least 90 days. You repay it over 15 years; a missed repayment is added to taxable income. The FHSA and Home Buyers' Plan stack, so a couple using both fully can structure up to $200,000. Add the $10,000 Home Buyers' Tax Credit amount, worth up to $1,500, and land transfer tax rebates of up to $4,000 in Ontario and $4,475 in Toronto. Note that the old First-Time Home Buyer Incentive closed in March 2024 and is not available.
A gift from immediate family can also form part or all of your down payment on a standard insured mortgage, documented with a gift letter confirming it need not be repaid. And eligible first-time buyers of newly built homes may qualify for the federal GST/HST rebate: up to $50,000 on homes to $1 million, phasing out to $1.5 million, for agreements on or after March 20, 2025. Add the pieces together before concluding the minimum is out of reach — for many GTA buyers, it is closer than it first looks.
Frequently Asked Questions
Can you buy a house in Canada with 5% down?
Yes, with a correction. Five percent is the minimum only on the first $500,000. Above that you need 5% of the first $500,000 plus 10% of the remainder, up to $1,499,999 — so an $800,000 home requires $55,000, not $40,000. The mortgage must be insured, you must pass the stress test, and closing costs are extra.
Do you need 20% down to avoid mortgage insurance?
Yes. Default insurance is mandatory whenever the down payment is under 20%, and it is unavailable at $1.5 million or more, where 20% is the minimum. The premium falls as your down payment rises: 4.00% of the mortgage at 5% to 9.99% down, 3.10% at 10% to 14.99%, and 2.80% at 15% to 19.99%.
How much mortgage insurance do you need to purchase?
The amount is set by your down payment band, not chosen by you. On an $800,000 home with the $55,000 minimum, the mortgage is $745,000 and the premium at 4.00% is $29,800, added to your balance. Ontario charges 8% PST on that premium — $2,384 here — paid in cash at closing, never added to the mortgage.
What is the maximum home price for an insured mortgage in Canada?
The maximum is $1.5 million, raised from $1 million on December 15, 2024. Below that price you can buy with less than 20% down, with insurance from CMHC, Sagen, or Canada Guaranty. At $1.5 million or more insurance is unavailable, so a minimum down payment of 20% of the full price is required.
Is it better to put more money down on a house?
Often, but not always. More down means a smaller mortgage, a cheaper premium — or none at 20% — and lower payments. It can also mean years of extra saving and rent while prices move. Many buyers choose the middle: 10% or 15% down, reaching a cheaper premium band. Compare the premium saved against your realistic saving timeline.
Looking to Buy or Sell in Toronto & GTA?
Work With Raj Gill. Want to know exactly what your minimum down payment, insurance premium, and cash-to-close would be at the price you are considering? Get the math done before you view homes. Call Raj Gill at (647) 657-4224 or email nestkey11@gmail.com for a clear, no-pressure breakdown built on your real numbers.