Ontario purchase planning
The down payment is a source-of-funds story, not only a percentage.
Before a lender can rely on the money, it needs to understand where it came from. The amount, timing, account history and supporting documents can matter just as much as the headline percentage.
Federal minimums
Know the threshold — then plan beyond it.
These are general minimum down-payment rules for eligible owner-occupied purchases; lender, insurer and property requirements still apply.
Purchase below $500,000
5%
General federal minimum for the full purchase price.
$500,000 to $1.5M
5% + 10%
5% of the first $500,000 and 10% of the amount above it.
$1.5M and above
20%
General minimum; insured financing is not typically available at this price level.
The minimum is not a recommendation for every buyer. A larger down payment may reduce the mortgage, debt servicing and mortgage-insurance premium; keeping some funds back may preserve a useful reserve. The best balance depends on the purchase price, household income, closing costs and the stability of the funds.
Below 20% down, default insurance is normally required where the mortgage qualifies for it. It is not a substitute for lending criteria: the borrower, property, credit and documentation still need to meet lender and insurer requirements.
Acceptable sources of funds
Personal savings, chequing and investment accounts are common sources. Lenders may also accept a family gift, proceeds from selling another property, a registered-plan withdrawal, or other documented sources permitted by policy. The key is that the origin and movement of the money are clear.
A typical expectation is approximately 90 days of account history for funds being used toward the purchase. The account statement trail should show the balance, account holder and transactions. A large recent deposit is not automatically a problem, but it often requires an explanation and evidence such as a gift letter, sale agreement or transfer record.
Do not move funds repeatedly between accounts simply to make a statement look cleaner. Keep the evidence orderly, label transfers where possible and ask what documentation is needed before the offer deadline creates pressure.
Useful source documentation
- Recent bank or investment statements showing account ownership, balance and transaction history.
- A signed lender-format gift letter and evidence of the transfer for eligible gifted funds.
- Statements and withdrawal records for FHSA or RRSP Home Buyers’ Plan funds.
- Sale documents and lawyer records if the source is proceeds of sale.
- A clear explanation and records for large deposits, bonuses, investment redemptions or transfers.
Gifted funds and gift letters
A gift from an eligible family member is a common way to supplement a buyer’s own savings. The lender normally requires a gift letter stating who is giving the funds, the amount, the relationship to the buyer and that there is no repayment expectation. Its exact form and eligible donor rules depend on lender and program policy.
Gift letters are not just a formality. An undisclosed loan can change a borrower’s debt service and credit picture. Be candid about whether funds are truly gifted, then follow the lender’s documentation instructions. The lender may request proof that the donor had the funds and that the money has reached the buyer’s account.
Gifted money can assist the down payment, but the borrower should still reserve separately for closing costs and the early expenses of homeownership.
FHSA and the RRSP Home Buyers’ Plan
An FHSA can help eligible first-time buyers build a dedicated purchase fund. The RRSP Home Buyers’ Plan may permit eligible buyers to withdraw from RRSPs under its conditions. Both are tax-program questions as well as mortgage-planning questions, so verify the current rules, documentation and timing before counting on the funds.
For a Home Buyers’ Plan withdrawal, buyers should understand the eventual repayment schedule. For any registered-account withdrawal, obtain the records that show the account, withdrawal and destination of funds. Avoid leaving a transfer until immediately before a closing deadline.
The first-time buyer guide explains how these sources sit beside closing costs, Ontario land transfer tax and the offer process.
Insurance and borrowing
A smaller down payment changes more than the mortgage amount.
It can affect default insurance, debt ratios, cash needed at closing and lender fit.
Default insurance premium
With less than 20% down, a mortgage default insurance premium is commonly required. Premium tiers are generally tied to loan-to-value: a smaller down payment means a higher loan-to-value and can mean a higher premium. The premium is often added to the mortgage.
Ontario tax on the premium
While the premium may be added to the mortgage, Ontario provincial sales tax on it is generally payable at closing. Ensure that cash cost appears in your lawyer’s closing estimate.
Borrowed down payment
Borrowed funds must be disclosed and can increase the debts used in qualification. Some programs allow it only under limited conditions; others require the down payment to come from the borrower’s own resources or a gift.
Do not drain the reserve
Using every available dollar for down payment can make the first months of homeownership fragile. Leave room for closing costs, moving, repairs, utilities and ordinary surprises.
Do not combine the budgets
Down payment and closing costs are different cash needs.
Down payment
The portion of the purchase price paid in cash, used to determine the mortgage size and loan-to-value.
Closing costs
Separate costs such as land transfer tax, legal fees, disbursements, title insurance, appraisal where required, inspection and adjustments.
After-closing reserve
Funds for moving, utility set-up, furnishings, immediate repairs and a household buffer.
A clean plan before the offer
List every source and the estimated amount. Mark whether it is already in your account, needs to be withdrawn, will be gifted or depends on a sale. Then list every closing item separately. That simple exercise can prevent a buyer from using their available cash twice on paper.
Once you know the structure, a detailed qualification review can identify what is likely to be requested by the lender. Keep the statements and transfer records current through closing; the lender may ask for updated evidence.
Do not provide government ID, account passwords or banking-login details through an initial inquiry. If documents are requested for a review, redact SINs, full account numbers and information that is not required.
Questions
Down-payment FAQs
What is the minimum down payment in Canada?
For an owner-occupied purchase below $500,000, the minimum is generally 5%. From $500,000 to $1.5 million, it is generally 5% of the first $500,000 plus 10% of the portion above $500,000. A purchase of $1.5 million or more generally requires at least 20% down.
Does a 20% down payment avoid every mortgage cost?
A 20% down payment normally avoids the mortgage default insurance requirement that commonly applies below 20%, but it does not remove legal fees, land transfer tax, appraisal, inspection, property tax, maintenance or lender qualification requirements.
Why do lenders ask for 90 days of account history?
Lenders commonly expect approximately 90 days of history for the funds used toward a down payment. The aim is to establish the source of the money and identify large deposits that need explanation. Exact requirements vary by lender and program.
What does a gift letter need to show?
The lender’s form typically confirms the donor, recipient, amount, relationship and that the funds are a gift rather than an undisclosed loan. The lender may also ask for proof of the transfer and source documents from the donor.
Can I use a FHSA and RRSP Home Buyers’ Plan for the same purchase?
Many eligible buyers use both programs, subject to their separate rules. Confirm current limits, eligibility, withdrawal processes and Home Buyers’ Plan repayment requirements with your financial institution or tax adviser.
Can I borrow my down payment?
Some borrowers may have options, but borrowed funds can affect debt ratios, interest costs and lender eligibility. The borrowing must be disclosed and documented. It should be assessed as part of the complete mortgage plan, not added at the last minute.
Is the default insurance premium paid in cash at closing?
The premium is commonly added to the mortgage rather than paid as part of the cash down payment. Ontario provincial sales tax on the premium is generally payable at closing. Confirm the actual calculation with your lender and lawyer.
Next step
Turn your down payment into a documented purchase plan.
A real review can help you understand how your savings, gifts and registered-plan funds may fit a purchase file, subject to lender underwriting and policy.
A real person reviews your scenario. This platform does not issue automated approvals, and no financing outcome is guaranteed.