What is the Minimum Down Payment Required for a Home in Toronto?

Buying a home in Toronto can be a daunting task, especially with soaring property prices. One of the most critical aspects of planning your purchase is understanding the minimum down payment required. Whether you’re a first-time homebuyer or looking to upgrade, knowing how much you’ll need to put down is essential for budgeting and getting pre-approved for a mortgage. Here’s a detailed breakdown of what you need to know about down payments in Toronto.

1. What is a Down Payment?

A down payment is the initial amount of money you pay toward the purchase price of your home. The remainder is financed through your mortgage. The size of your down payment can significantly impact your mortgage terms, interest rate, and whether or not you need mortgage insurance.

2. Minimum Down Payment Requirements in Toronto

The required minimum down payment in Canada depends on the purchase price of the home:

– For homes priced up to $500,000: You’ll need to provide at least 5% of the purchase price as a down payment.

– For homes priced between $500,000 and $999,999: You’ll need 5% of the first $500,000, and 10% of the portion of the price above $500,000.

– For homes priced at $1 million or more: A down payment of 20% is required, regardless of the mortgage size.

Let’s break this down with an example:

If you’re buying a home priced at $750,000:
– 5% of the first $500,000 = $25,000
– 10% of the remaining $250,000 = $25,000
– Total minimum down payment = $50,000

As of Dec 15th the regulation will change and as a result the minimum down payment will change. For homes priced between $500,000 and $1.5 million: A minimum down payment of 5% is required on the first $500,000, and 10% on the portion above $500,000 up to $1.5 million. For homes priced at 1.5 million or up: A down payment of 20% is required.

It’s crucial to note that these figures are minimum requirements, and a larger down payment can significantly benefit you in securing better mortgage terms.

3. How Your Down Payment Affects Your Mortgage

The size of your down payment plays a critical role in your mortgage. If your down payment is less than 20% of the purchase price, you are required to purchase mortgage default insurance. This insurance protects the lender in case you default on your mortgage but adds an extra cost to your monthly payments.

Larger down payments not only reduce your overall mortgage amount but also help you avoid these extra insurance premiums.

4. Tips for Saving for a Down Payment

Saving for a down payment, especially in a high-priced market like Toronto, can seem overwhelming. Here are a few strategies to help you build your savings faster:

– Set a clear goal: Knowing exactly how much you need to save helps you stay motivated.

– Open a dedicated savings account: Consider opening a high-interest savings account specifically for your down payment.

– Explore government programs: First-time homebuyers may be eligible for programs like the Home Buyers’ Plan (HBP), which allows you to borrow from your RRSPs tax-free, which offers shared equity with the government. Also The Government of Canada introduced the First Home Savings Accounts (FHSAs) in 2023. This is a registered savings account in which first-time homebuyers in Canada can contribute up to $8,000 per year, up to a lifetime maximum contribution limit of $40,000 per taxpayer. Open a Tax-Free Savings Account (TFSA).

– Track your spending: Cutting back on non-essential expenses can significantly boost your savings over time.

5. Why Choose Dominion Lending Centres?

At Dominion Lending Centres, we specialize in helping clients navigate the complexities of Toronto’s real estate market. Whether you’re a first-time homebuyer or looking to move up, we’ll provide personalized mortgage advice, helping you understand your options and secure the best terms available.

Ready to take the next step toward homeownership? Contact us today for a personalized consultation.

Sara Taheri
Dominion Lending Centres Expert Financial, Lic#12129
📞 416-879-2985
📧 sara@sarasecuremortgages.com
🌐 sarasecuremortgages.com