If you’ve been thinking about buying a home in Canada, you’ve probably heard a lot of “rules” about down payments — and chances are, not all of them are true. From how much you really need to save, to what counts as a valid source of funds, to whether you can buy with less than 20% down, misinformation about down payments is one of the biggest barriers to homeownership.
In this post, we’ll debunk the most common myths Canadians believe about down payments — and show you what the real rules are in 2025.
Myth #1: You Need 20% Down to Buy a Home
This is the most persistent — and most misleading — down payment myth out there.
While a 20% down payment is ideal because it helps you avoid mortgage default insurance (known as CMHC insurance), it’s absolutely not required for most homebuyers.
In Canada:
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For homes priced up to $500,000, you need only 5% down.
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For homes between $500,000 and $999,999, you’ll need 5% on the first $500,000 and 10% on the rest.
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For homes $1 million or more, the minimum jumps to 20%, because insured mortgages aren’t allowed above that threshold.
So if you’re buying a $650,000 home, your minimum down payment isn’t $130,000 — it’s actually $40,000. That’s a huge difference, and one that puts homeownership within reach for many Canadians who assume they’re priced out.
Myth #2: Your Down Payment Has to Come From Savings
Not necessarily. While traditional savings and investments are common sources, there are several legitimate ways to fund your down payment in Canada:
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Home Buyers’ Plan (HBP): You can withdraw up to $35,000 from your RRSP ($70,000 for a couple) to use toward your first home purchase. You’ll need to repay it over 15 years, but it’s a powerful way to access tax-deferred funds.
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First Home Savings Account (FHSA): Introduced in 2023, this new account lets you save up to $8,000 per year (to a $40,000 lifetime maximum), and contributions are tax-deductible — like an RRSP. When you withdraw for a qualifying home, it’s tax-free — like a TFSA.
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Gifted Funds: If a family member (usually a parent or grandparent) wants to help, they can gift money for your down payment. Lenders will typically require a signed letter stating it’s a gift, not a loan.
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Equity From Another Property: If you already own a home or investment property, you can refinance or use a home equity line of credit (HELOC) to fund your next purchase.
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Incentive Programs: Some regions and employers offer first-time homebuyer grants or shared-equity programs that contribute toward your down payment.
Bottom line: it’s not just about how much you have saved — it’s about knowing which tools to leverage.
Myth #3: Bigger Is Always Better
It seems logical — the more you put down, the better, right? In theory, yes: a larger down payment reduces your mortgage size and can save thousands in interest over time.
But there’s a trade-off. Putting too much down can leave you cash-poor after closing, with little left for emergencies, repairs, or furnishing your new home.
Financial advisors often recommend balancing your down payment with a healthy emergency fund — ideally three to six months of expenses — especially in today’s higher-rate environment.
And remember: even with less than 20% down, CMHC insurance protects both lenders and borrowers, often allowing you to get a competitive rate and lower overall borrowing costs than many assume.
In fact, insured mortgages often carry slightly lower interest rates, since they’re backed by the government. Sometimes, the “smaller down payment” route makes more sense financially than draining your savings.
Myth #4: You Can’t Buy Without Help
While getting assistance from family or programs can make things easier, many Canadians successfully buy homes entirely on their own — especially when they take advantage of government incentives and smart planning tools.
Some of the most helpful programs in 2025 include:
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First Home Savings Account (FHSA): Combining this with the RRSP Home Buyers’ Plan can give you up to $75,000 in tax-advantaged savings toward your first home.
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First-Time Home Buyer Incentive (FTHBI): Although smaller in scale now, this federal shared-equity program can still reduce monthly payments by having the government contribute up to 5% (for resale homes) or 10% (for new builds) toward your purchase.
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Land Transfer Tax Rebates: Ontario, B.C., and PEI offer rebates for first-time buyers that can save you up to several thousand dollars at closing.
So no — you don’t need a massive inheritance or outside help. You just need a smart strategy and awareness of the resources available.
Myth #5: The Rules Are the Same Everywhere
Canada’s real estate system may be federal in structure, but housing rules are highly regional. Your down payment requirements, tax credits, and rebates can vary depending on where you buy.
For example:
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Ontario and B.C. have provincial land transfer taxes, but also offer rebates for first-time buyers — up to $4,000 and $8,000 respectively.
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Alberta doesn’t charge a provincial land transfer tax at all, significantly reducing closing costs.
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Quebec has its own unique property transfer tax structure (the “Welcome Tax”), which is tiered and varies by municipality.
If you’re relocating provinces or buying in a new city, it’s important to understand the local landscape. A mortgage professional can break down how regional costs and rebates affect your affordability.
Practical Tips for Building Your Down Payment
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Automate your savings: Set up biweekly transfers to your FHSA or high-interest savings account.
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Cut “invisible expenses”: Small lifestyle changes (subscriptions, dining out, etc.) can add up to thousands annually.
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Invest wisely: Consider low-risk investments for your down payment fund if your purchase timeline is over a year away.
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Track your progress: Use mortgage calculators to see how each milestone moves you closer to your goal.
Buying a home in Canada doesn’t require 20% down — it requires knowledge, strategy, and consistency. By understanding how down payment rules really work — and taking advantage of the programs designed to help you — you can move from dreaming about homeownership to actually achieving it. Don’t let myths or misinformation stop you from getting started. Connect with a mortgage professional who can help you understand your options, maximize your savings, and build a plan that fits your financial reality.
Because in 2025, the biggest barrier to homeownership isn’t the down payment — it’s believing you can’t afford one.