Down Payment Strategies for First-Time Buyers in Ontario

If you’re saving for your first home, your down payment is the key that unlocks everything.

How much you have — and where it comes from — can determine your lender options, insurance costs, and even your approval chances.

Here’s what every Ontario first-time homebuyer needs to know about down payments in 2025.

1. The Minimum Down Payment Rules in Canada

Canada has a tiered system based on property value:

• 5% on the first $500,000 of the purchase price

• 10% on the portion between $500,000–$999,999

• 20% minimum for homes $1 million+ (these cannot be insured)

Example:If you buy a $700,000 home, your down payment is:(5% of $500,000) + (10% of $200,000) = $45,000 total

Homes with less than 20% down require mortgage default insurance through CMHC, Sagen, or Canada Guaranty — which can be added to your mortgage amount.

2. Where Your Down Payment Can Come From

Let’s break down the most common and approved sources:

✅ Personal Savings or Investments

• Lenders need at least 3 months of bank statements showing consistent savings.

• Large, unexplained deposits (like cash gifts) will trigger questions — document everything.

✅ Gifted Funds From Family

• Gifts must come from an immediate relative (parent, sibling, or grandparent).

• A signed gift letter confirming the money isn’t repayable is required.

• The funds must be in your account at least 15 days before closing.

✅ RRSP Home Buyers’ Plan (HBP)

• Withdraw up to $35,000 tax-free from your RRSP to use as a down payment.

• You have 15 years to repay it (starting in year two).

• If two buyers each withdraw $35,000, that’s $70,000 total.

✅ First Home Savings Account (FHSA)

• The newest and most powerful tool for Canadians buying their first home.

• Save up to $8,000 per year (to a lifetime max of $40,000).

• Contributions are tax-deductible, and withdrawals for your first home are tax-free.

• You can use the FHSA and RRSP HBP together — that’s up to $75,000 per person toward your first home.

3. Borrowing Your Down Payment

Yes, you can borrow your down payment (for example, through a personal loan, line of credit, or cash-back mortgage). But remember:

• The payment on that loan must be included in your debt service ratios.

• Borrowed down payments reduce how much you qualify for.

• Some lenders may not allow it for insured mortgages.

Borrowing can be a temporary bridge — but it needs to be handled carefully so it doesn’t undermine your approval.

4. Why You Should Save More Than the Minimum

It’s tempting to aim for the minimum down payment, but putting down a little more can pay off big:

• Lowers your mortgage insurance premium

• Reduces your monthly payment

• Builds instant equity and long-term flexibility

Even an extra $5,000–$10,000 can improve your approval ratios and reduce your stress test numbers.

5. Build a Down Payment Game Plan

Smart buyers start early and diversify their savings:

1. Open a FHSA and contribute automatically.

2. Maximize your RRSP contributions — it’s a tax refund now and home equity later.

3. Set up an automatic savings plan into a separate “home fund” account.

4. Track progress monthly — consistency beats perfection.

The Bottom Line

A smart down payment strategy is the foundation of homeownership. Whether it’s building your savings, leveraging tax-free accounts, or combining multiple programs, the key is knowing your options and preparing early.

CTA: Let’s build your personalized down payment plan.Schedule a free 20-minute consultation at LaframboiseMortgage.ca — and let’s get you closer to the keys of your first home.