Down Payment
Quick Definition
The upfront cash you pay toward a home purchase, expressed as a percentage of purchase price.
Full Explanation
A down payment is the initial lump-sum payment made toward a property purchase, with the remainder financed through a mortgage. In Canada: 5% minimum for homes up to $500,000; 5% on first $500K + 10% on the portion above $500K for homes up to $999,999; and 20% minimum for homes $1 million or more (no CMHC insurance available above $1M). A down payment of 20% or more avoids mandatory mortgage default insurance (CMHC, Sagen, or Canada Guaranty), saving thousands. Funds can come from savings, RRSP Home Buyers' Plan ($35K max), and gifts from family.
Related Terms
CMHC (Canada Mortgage and Housing Corporation)
Federal Crown corporation that provides mortgage default insurance for high-ratio mortgages.
Mortgage
A secured loan used to purchase real estate, with the property as collateral.
Loan-to-Value Ratio (LTV)
The percentage of a property's value financed by a mortgage.
RRSP (Registered Retirement Savings Plan)
A tax-deferred savings account for retirement, with deductible contributions.
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