The minimum down payment on a Canadian home is set by federal rules and by the purchase price. It is not negotiable, and it is not up to the lender. Here is how it works out in real dollars at the prices people actually pay in London and St. Thomas.
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548 490 4577The three brackets, in plain numbers
Take a $600,000 home, which buys a solid family house in much of London and a newer build in St. Thomas. You need 5% of the first $500,000, which is $25,000, plus 10% of the remaining $100,000, which is $10,000. Total minimum: $35,000. On a $450,000 home, the whole price sits in the first bracket, so the minimum is $22,500. On a $1.6 million home, the insured brackets no longer apply at all and you need the full 20%, which is $320,000.
| Purchase price | Minimum down payment | How it is calculated |
|---|---|---|
| $400,000 | $20,000 | 5% of the whole price |
| $500,000 | $25,000 | 5% of the whole price |
| $600,000 | $35,000 | 5% of $500,000 + 10% of $100,000 |
| $750,000 | $50,000 | 5% of $500,000 + 10% of $250,000 |
| $1,500,000 | $300,000 | 20% — insured mortgages are not available at this price |
Under 20% means mortgage default insurance
Put down less than 20% and your mortgage must be insured, which protects the lender, not you. The premium is a percentage of the mortgage amount and it is normally added to the loan rather than paid up front. The smaller your down payment, the higher the premium rate, so moving from 5% to 10% lowers both the amount you borrow and the rate applied to it. In Ontario the provincial sales tax on that premium is payable at closing and cannot be rolled into the mortgage, so budget for it as a closing cost.
What else has to be in the bank
The down payment is not the whole picture. You will also need closing costs, which typically run 1.5% to 4% of the purchase price once you add land transfer tax, legal fees, title insurance and adjustments. Lenders also want to see that the down payment has been in your account for roughly 90 days, or that you can document where it came from. A gift from a parent is fine, but it needs a signed gift letter confirming it does not have to be repaid.
Frequently asked questions
Can I use my RRSP for a down payment in Ontario?
Yes. The federal Home Buyers Plan lets an eligible first-time buyer withdraw from an RRSP tax-free for a down payment, and a couple can each withdraw from their own plan. The money has to be repaid to the RRSP over a set schedule that begins a few years later. The First Home Savings Account is the other common route, and withdrawals for a qualifying home are not repaid at all. Confirm current limits with your bank, because both programs have changed in recent years.
Is a bigger down payment always better?
Not always. A larger down payment lowers your mortgage, your insurance premium and your monthly payment. But draining every account to reach 20% can leave you with nothing for closing costs, a furnace failure or the first few months of ownership. In a lot of cases 10% down with a healthy cash reserve is the more comfortable position than 20% down with none.
Do I need more money down in St. Thomas than in London?
No. The rules are federal and price-based, so the only thing that changes between the two cities is the price. Because St. Thomas prices generally sit below comparable London properties, the same house type often lands entirely in the 5% bracket there while its London equivalent crosses into the 10% portion.
