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Why is a down payment important when buying a home?

“Always pick your yard based on your Summer lifetstyle.”


September 26, 2017 - Karl Yeh

Wondering why you actually need a down payment when buying a home? In this episode, we discuss the minimum down payment requirements in Canada and if there are any different requirements for the types of home you may be looking to purchase:


Prefer to listen?



Karl Yeh:

Hi, everyone, and welcome to another edition of Homebuyer's School. Today, I'm joined by Troy Champ, Mortgage Advisor with Mortgage Tree, and today the question that we're going to answer is:


Why a down payment on a house is important?

Troy Champ:

A down payment is required by the government when you are purchasing a house.

It's part of the Bank Act, that you have a certain percentage of funds as a down payment to be able to get financing for the rest of the house.

How to finance your home

Is it the same for a resale home, or a brand new home?

Troy Champ:

Yeah, the down payment requirements are the same, whether it's a brand new home, or it's a resale property.

The minimum down payment is five percent of the first $500,000, and then 10% of any amount over $500,000.

Is there a minimum down payment for anything over that?

If a purchase price exceeds $1,000,000, it's no longer considered an insurable mortgage, which means that the government won't insure that mortgage for you.

Which means that you must have a minimum of 20% as a down payment.

For anything over $1,000,000.

That's right. Anything over $1,000,000. And that's nationwide.

Karl Yeh:

Do you have anything else to add?

Troy Champ:

The source of the down payment's a big factor, as well.

Money laundering is a big issue with the banks right now, so they are required to verify the source of the down payment.

The sources of the down payment can be from your personal savings, whether that's out of your account, or RSPs, whether it's a gift from a family member.

Even being able to borrow the down payment is acceptable with some banks.

Karl Yeh:
How about if you have ... Does it have to be with the bank, or ... Does it have to be verifiable? Meaning, let's say I have a pile of cash in my house, is that okay, too?

Troy Champ:

The money must be deposited with an institution first. You can't just take cash in anymore and use that. And it's because of the money laundering factor.

Okay. Well, thank you very much for the information.

Troy Champ:

You're welcome!

Thank you for joining us, and we'll catch you next time.


Your turn:

Let us know if you have additional home buying questions that we can answer by submitting them in the comments section below. 

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About Troy Champ:

Troy is one of those uniquely capable mortgage experts who has refined his craft over 17 years of experience with two of Canada’s major financial institutions and then one of the largest mortgage brokerage firms in Western Canada. He is amongst a rare group of professionals who have funded over $500 million in mortgages over his career and received many top level awards for excellence.

A hallmark of Troy’s service pledge is unparalleled availability. While many will say they provide great service, Troy proves it day in day out without question. His clients are never left waiting for answers to their enquiries. Quite simply, his clients are thrilled to work with someone who says what they do and does what they say.

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