Minimum Down Payment Rules in Ontario: 5% vs 20% Explained
Understand Ontario’s mortgage down payment rules — when you need only 5%, when 20% makes sense, how CMHC insurance works, and how to save smart.
Introduction
Navigating the world of mortgages can feel overwhelming — especially when you're trying to decide how much of a down payment to make. In Ontario, the difference between putting down 5% versus 20% isn’t just about how much cash you bring to the table; it also influences whether you pay for mortgage insurance, your monthly payments, and even how long your mortgage can be amortized. As an experienced mortgage agent in Ontario, I’ll walk you through the latest rules, the trade-offs, and actionable tips so you can make a confident, informed decision.
What Are the Current Minimum Down Payment Rules in Ontario?
minimum down payment rules set by Canada’s regulatory bodies. Here’s what you need to know:
If a property’s purchase price is $500,000 or less, the minimum down payment is 5%. Canada
If the purchase price is between $500,000 and $1.5 million, the rule changes: you need 5% on the first $500,000 plus 10% on the portion above that.
For homes priced above $1.5 million, a 20% down payment is generally required for mortgage default insurance eligibility.
Why Does a 5% Down Payment Usually Mean CMHC Insurance?
When you put down less than 20%, most lenders require mortgage default insurance, commonly known as CMHC insurance (or similar private insurer coverage). Here's how it works:
CMHC insurance protects the lender, not you.
Insurance premiums depend on the loan-to-value (LTV) ratio, which is directly related to your down payment size. For example:
5%–9.99% down → Premium ~ 4.00% of the mortgage.
10%–14.99% down → ~ 3.10%.
15%–19.99% down → ~ 2.80%.
In Ontario, provincial sales tax (PST) applies on the CMHC premium (8% as of current rules), and this tax cannot be added into your mortgage — you pay it at closing.
The insurance premium is often added to your mortgage principal, meaning you pay interest on it over time unless you pay it upfront.
Trade-offs: 5% vs 20% — Which Is Better for You?
Advantages of a 5% Down Payment
Lower upfront cash needed: This is a big win, especially for first-time buyers.
Access to homeownership sooner: If saving for 20% takes years, 5% can get you in now.
Mortgage rates: Insured mortgages (with CMHC) often have competitive rates; sometimes lenders price those loans attractively. (Though depends on broker/lender.)
Drawbacks of a 5% Down Payment
CMHC premium cost: This can add up and be financed into your mortgage — increasing your long-term cost.
Higher monthly payments: Because your mortgage principal is larger (after adding insurance), your payments may be higher.
Amortization limits: For insured mortgages, maximum amortization is often 25 years (though first-time buyers or new builds may go to 30).
More interest paid over time: Because you're borrowing more, over the life of your mortgage you'll likely pay more interest.
Advantages of Putting Down 20%
Big upfront cash requirement: Saving for 20% is often the hardest part.
Opportunity cost: That money could be invested or used elsewhere.
Delay in buying: If you're waiting to save, rising real estate prices could outpace your savings.
Key Regulatory and Mortgage-Insurance Rules to Know (Ontario-Specific)
Credit Score Requirements: For CMHC-insured mortgages, at least one borrower typically needs a credit score of 600+.
Debt Service Ratios (GDS/TDS): Insured mortgages often have maximum Gross Debt Service (GDS) of 39% and Total Debt Service (TDS) of 44%.
Insurable Amount Cap: As of recent updates, CMHC-insurable mortgages are capped for properties under $1.5 million.
Amortization:
Standard insured: max 25 years. eppdscrmssa01.blob.core.windows. CMHC Quick Reference
First-time buyers / newly constructed homes: can go up to 30 years under certain conditions.
Source of Down Payment: The down payment must come from acceptable sources (savings, non-repayable gift). CMHC generally disallows non-traditional sources (like a loan) for some bands. Learn more about mortgage pre-approval
Practical Scenarios & Examples
Here are a few examples to help put things in perspective:
Example 1: Buying a $450,000 home in Ontario
Minimum down payment = 5% → $22,500. Canada
Because it’s under 20%, CMHC insurance is required → premium ~4% of the mortgage amount (if 5% down).
That insurance premium could be added to the mortgage, and PST (8%) on that premium is paid at closing.
Example 2: Buying a $700,000 home
First $500,000 → 5% = $25,000
Remaining $200,000 → 10% = $20,000
Total minimum down payment = $45,000.
With this < 20% down, you’ll need CMHC or similar insurance, and pay premium accordingly.
Example 3: Putting down 20% on that $700,000 home = $140,000
No insurance needed → savings over time.
Actionable Tips for Ontario Home-buyers
Run the numbers: Use a CMHC-insurance calculator (like on Ratehub or WOWA) to estimate how much your premium will be and how it affects your mortgage.
Always factor in closing costs: Remember to budget for PST on insurance (in Ontario), legal fees, land transfer taxes, and more.
Choose your down payment strategically: If you can afford more than the minimum, weigh whether putting in more now (i.e., 20%) saves you more in the long run.
Talk to a mortgage agent: A licensed mortgage agent (like me) can help you compare lenders, mortgage terms, amortization periods, and estimate total cost including insurance.
Save smart: If you're targeting 20% down, set up a dedicated savings plan (e.g., TFSA, high-interest savings) to accelerate your goal.
Common FAQs
Q: Can I avoid CMHC insurance if I borrow more than 20% for down payment?
A: No — borrowing your down payment (e.g., via a loan) is often not considered acceptable “traditional” source by CMHC, and could disqualify you or raise your effective risk.
Q: Does 20% down always mean no insurance?
A: Usually yes, for conventional mortgages. But in rare cases, lenders may still require insurance if they deem risk is high or property doesn’t meet certain standards.
A: With insured mortgages, first-time buyers or buyers of newly constructed homes may be eligible for 30-year amortization.
Conclusion
Deciding between a 5% versus 20% down payment in Ontario hinges on more than just how much cash you have now — it's about balancing short-term affordability with long-term cost. A 5% down payment can make home-ownership more accessible, but comes with CMHC insurance costs and higher monthly payments. On the other hand, 20% down can save you on insurance, reduce your payments, and build equity faster, but it requires significantly more savings.
