The 20% Down Payment Myth

One of the biggest misconceptions I hear is:

“I’ll buy a home once I’ve saved a 20% down payment.”

It’s a great goal if you can reach it.

But here’s the truth:

Many Canadians don’t need a 20% down payment to buy a home.

In fact, depending on the purchase price, many buyers can purchase with as little as 5% down.

And here’s something many people don’t realize:

It’s not just first-time buyers who may qualify. If you’ve owned a home before and are buying again, you may still be able to purchase with as little as 5% down, provided the home and your mortgage meet the applicable lending and mortgage insurance requirements.

For many people, that completely changes the conversation.

Why Do So Many People Think They Need 20%?

For years, 20% has been talked about as the “ideal” down payment.

And there are certainly benefits to putting 20% down. You avoid paying mortgage default insurance, you borrow less money, and your monthly mortgage payments are typically lower.

But “ideal” doesn’t mean “required.”

Waiting years to save an extra 15% could mean delaying your home purchase longer than necessary.

Here’s What It Looks Like

Let’s use a simple example.

Imagine you’re buying a $500,000 home.

A 20% down payment would be:

$100,000

That number alone is enough to convince many people they need to keep saving.

But the minimum down payment on a $500,000 home is:

5% = $25,000

That’s a difference of $75,000.

Of course, every situation is different, but knowing the actual minimum can help you make an informed decision instead of ruling yourself out before exploring your options.

Does That Mean You Should Always Put Down 5%?

Not necessarily.

The right down payment depends on your financial situation and your long-term goals.

Putting more money down can:

• Lower your monthly mortgage payment
• Reduce the amount you borrow
• Help you build equity faster

On the other hand, putting every dollar you’ve saved toward your down payment isn’t always the best strategy.

You’ll still need money for closing costs, moving expenses, and it’s important to have an emergency fund after you move in.

Sometimes keeping some money in the bank provides more financial flexibility than putting it all toward the purchase.

Don’t Forget About Closing Costs

The down payment is only one part of buying a home.

You’ll also want to budget for expenses such as:

• Legal fees
• Land transfer tax (where applicable)
• Home inspection
• Title insurance
• Adjustments
• Moving costs

Planning for these expenses ahead of time helps avoid surprises on closing day.

There Are Programs That Can Help

If you’re an eligible first-time homebuyer, there are also programs that can help you reach your goal sooner.

These include:

• The First Home Savings Account (FHSA)
• The Home Buyers’ Plan (HBP), which allows eligible buyers to withdraw funds from their RRSP
• First-time home buyer tax credits

Many buyers know these programs exist but aren’t sure how they work or whether they qualify.

Understanding your options before you start shopping can make a significant difference.

The Bottom Line

The biggest mistake isn’t buying with a 5% down payment.

It’s assuming you need 20% and putting your plans on hold without finding out what’s actually possible.

Every buyer’s situation is different.

The amount you should put down depends on your finances, your goals, the home you’re purchasing, and the mortgage that best fits your needs.

If you’ve been wondering whether you’ve saved enough to buy, let’s have a conversation.

You may be closer than you think.