What Is a Down Payment
A down payment is the portion of a home’s purchase price that a buyer pays upfront when purchasing a property. It reduces the amount that needs to be borrowed through a mortgage and plays an important role in affordability, qualification, and long-term financial planning.
In Ontario and across the GTA, down payment requirements are governed by federal mortgage rules and may vary depending on the purchase price of the home. Understanding how down payments work helps buyers prepare financially and avoid surprises during the mortgage process.
Minimum Down Payment Requirements
The minimum down payment required depends on the price of the property and whether the mortgage will be insured.
* Purchase Price Thresholds
Homes priced below certain thresholds may qualify for lower minimum down payments, while higher-priced homes require a larger upfront contribution. These rules are standardized across Canada and apply to most residential purchases.
* Insured vs Uninsured Mortgages
When a down payment is less than 20%, mortgage default insurance is required. A down payment of 20% or more generally results in an uninsured mortgage, which may follow different qualification criteria.
Sources of a Down Payment
Down payments can come from several acceptable sources, provided they meet lender guidelines.
* Savings and Investments
Personal savings, registered accounts, and certain investment proceeds are common sources. Lenders typically require documentation to confirm the origin and history of these funds.
* Gifted Funds
Some buyers use gifted funds from immediate family members. Gifted down payments usually require a formal gift letter confirming that repayment is not expected.
How Down Payments Affect Mortgage Options
The size of a down payment influences mortgage structure, insurance requirements, and overall borrowing costs. Larger down payments reduce the mortgage amount and may lower long-term interest costs.
Reviewing available mortgage solutions can help buyers understand how different down payment scenarios affect mortgage options. Buyers often use mortgage tools to estimate payments and compare affordability before finalizing their plans.
Planning a Down Payment in Ontario
Saving for a down payment requires long-term planning and realistic budgeting. Buyers in Vaughan, Markham, Richmond Hill, and Newmarket may face different price ranges and savings timelines depending on location and property type.
Some buyers reassess down payment strategies when preparing for mortgage renewals, particularly if they plan to move or purchase another property in the future.
For authoritative guidance, buyers can consult resources from the Canada Mortgage and Housing Corporation, consumer education from the Government of Canada, and broader financial context from the Bank of Canada.
Next Steps for Mortgage Planning
Understanding down payment requirements early can support more confident mortgage planning. Speaking with a qualified SMM Mortgage advisor can help clarify minimum requirements, acceptable sources, and how your down payment fits within your broader mortgage strategy.
Frequently Asked Questions
- 1. What is a down payment?
It is the upfront amount paid toward the purchase price of a home. - 2. Is a 20% down payment always required?
No. Some purchases allow for lower down payments, subject to mortgage insurance. - 3. Can gifted funds be used for a down payment?
Yes, if lender documentation requirements are met. - 4. Does a larger down payment guarantee approval?
No. Lenders also review income, credit, and overall affordability. - 5. Do down payment rules change?
They may change based on government policy and market conditions.