Most homebuyers need a mortgage to pay for their property. However, a mortgage won’t cover the full price of the home. You’ll need to put some money towards the purchase price from your own pocket. This is called a down payment.


A down payment is usually calculated as a percentage of the purchase price. In Canada, 20 percent is what most home buyers aim for because it means you won’t need to pay for mortgage insurance. Even if you don’t have that much, though, you can still make your dreams of home ownership come true.

Here is what you’ll need to consider when deciding on how much to put down for your next home.

Price of the Property

The purchase price of the home will have a direct impact on how much lenders will require from you in the form of a down payment. If the home costs less than $500,000, you’ll only need to put down 5 percent as a down payment.

For homes priced between $500,000 and $999,999, you’ll need to put down 5 percent of the first $500,000 and 10 percent of the remaining amount. So, for example, if the home costs $750,000, you’ll need $50,000 as a down payment, or $25,000 on the first $500,000 and another $25,000 for the remaining $250,000. Homes that are priced over $1 million require a 20 percent down payment.

Size of the Mortgage

The more you can save and put towards a down payment, the less you’ll need to borrow. This can save you money on your monthly mortgage payments and also on the interest you’ll have to pay over time. However, you’ll also need to be realistic about what you can afford. While a higher down payment has advantages, you don’t want to overextend yourself or your budget. Remember that the smaller the down payment, the more cash you’ll have for extra things like new furniture or renovations.

Lender Terms

How much you have for a down payment will impact the terms that lenders will offer you. It is one of the factors that lenders use to determine your LTV (loan-to-value) ratio. Your LTV is a representative of the risk factor of the mortgage. The higher the down payment, the more favourable the terms, such as interest rate. Lenders may also ask you for a higher down payment if you have a low credit score or other potential risk factors.

How much do you need for a down payment?

There is no one-size-fits-all answer when it comes to how much you need for a down payment. Your individual circumstances play a big role in what you can afford and what is the right number for you. You can use our mortgage payment calculator to compare some different options and help you find the right amount for a down payment.

If you are interested in learning more about getting a residential mortgage in Toronto or anywhere in Canada, then call Northwood Mortgage at 888-492-3690 or contact us here.