Down Payment Basics for First-Time Buyers: How Much You Need and How to Save

🏠 Down Payment Basics for First-Time Buyers: How Much You Need and How to Save

🧭 Start With Your Goal Number

Before you worry about percentages, pick a realistic price range for the kind of home you want. Once you have that range, your down payment target becomes much clearer.

For example, if you think you’ll buy around $350,000, then a 5% minimum down payment would be $17,500. If you want to aim higher than the minimum (to lower your mortgage costs), you might set a target like 10% or 15% and work toward that number instead.

The main point is this: you are not saving “a down payment.” You are saving a specific amount for a specific purchase range.

💰 Know the Minimum Down Payment Rules in Canada

In Canada, the minimum down payment depends on the purchase price:

• Homes $500,000 or less: minimum is 5%

• Homes above $500,000: minimum is a mix of
  5% on the first $500,000, plus 10% on the portion above $500,000

• Homes $1.5 million or more: you generally need 20% down

If you are buying with the minimum down payment, your lender will also look closely at your income, debts, and credit. Minimum down does not mean “easy approval,” it only means it is allowed.

🧾 What Changes When You Hit 20% Down

People talk about 20% down because it is a big line in the sand.

When you put less than 20% down, you usually need mortgage default insurance. This insurance protects the lender, not you, and the premium is added to your mortgage in most cases. The smaller your down payment, the higher that premium tends to be.

When you put 20% or more down, you usually avoid that insurance. You also often get a little more flexibility in your mortgage options.

That said, not everyone should wait until they have 20%. Some buyers choose to buy earlier with less than 20% down because they do not want to keep renting, or because they want to get into the market sooner. The best choice depends on your numbers, not a rule you saw online.

📌 Pro Tip: If you are close to 20% but not quite there, ask your mortgage professional what the insurance cost would actually be and compare it to the cost of waiting longer. The “right” move is often the one that keeps your overall plan stable.

🏦 Where Your Down Payment Can Come From

Most down payments come from one or more of these places:

• Personal savings (the most straightforward)

• A gift from immediate family (common for first-time buyers)

• RRSP funds through the Home Buyers’ Plan (if you qualify)

• Money saved in a First Home Savings Account (if you qualify)

Lenders usually want your down payment money to be clearly documented. If the money is a gift, there is often a simple gift letter form that needs to be signed, and the lender may want to see the funds deposited.

If you are moving money around to “create” a down payment at the last minute, it can cause stress and delays. Clean paperwork matters.

🧰 Use Registered Accounts Without Making It Complicated

If you are saving for your first home, two common tools are:

• FHSA: designed for first-time buyers, with tax advantages when used properly

• RRSP Home Buyers’ Plan (HBP): lets eligible buyers borrow from their RRSP for a home purchase, then pay it back over time

These can be helpful, but they are not automatic wins. The best option depends on your income, how long you plan to save, and whether you can repay what needs to be repaid.

A simple approach many buyers like is:

1. Build steady savings first

2. Use accounts like the FHSA and RRSP strategically once you understand the rules

3. Keep a separate cash buffer so you are not empty after closing

📌 Pro Tip: Treat your down payment and your emergency fund as two different jobs. If you combine them, you may “reach your goal” and still feel broke the day you get the keys.

🪙 Build a Saving Plan That Actually Works

A down payment goal feels big until you break it into steps.

Try this simple setup:

• Open a separate savings account just for the home

• Set up automatic transfers on payday

• Increase your transfer amount any time you get a raise, bonus, or pay off a debt

If saving feels slow, look for one change you can actually stick with:

• Lower one monthly bill

• Cut one subscription

• Redirect money you were already spending (takeout, rideshares, impulse shopping)

You do not need a perfect budget. You need a system you will follow for months.

🧱 Costs People Forget When Planning Their Down Payment

Many buyers focus so hard on the down payment that they forget the other costs that come with buying.

Common extras include:

• Home inspection

• Legal fees

• Appraisal (sometimes required)

• Moving costs

• Immediate basics after possession (locks, blinds, paint, small repairs)

• Property tax or utility adjustments at closing (depends on timing)

A good rule is to make sure you have money set aside beyond the down payment so you are not stretched thin.

✅ A Quick “Ready to Shop” Checklist

Before you start booking showings, try to have these basics handled:

• A clear down payment plan (minimum vs target)

• A separate savings account you are actively funding

• A rough estimate of closing costs saved

• A plan for where your down payment funds will come from (and how you’ll document it)

• A mortgage pre-approval (or at least a strong pre-qualification)

This keeps your search realistic and helps you move quickly when the right home shows up.

🎉 Final Thoughts

A down payment is not just a hurdle, it is part of your overall plan to buy confidently without draining your savings. Once you understand the minimum rules and set a target that matches your comfort level, saving becomes a lot more straightforward and a lot less stressful.

If you are unsure how much you should put down, how to combine different savings sources, or what you should have set aside besides the down payment, I’d be happy to help.

📞 Call or text me at (639) 295-4696
📧 tanner@twrealestate.ca
🌐 twrealestate.ca

Whether you are aiming to buy soon or just trying to build a smart plan for later, I can help you map out the numbers and the next steps so it feels clear.