5% vs 10% vs 20% Down Payment for a First Home: The Real 2026 Trade-Off

Five percent, 10% and 20% down are not simply three versions of “more is better.” They create different mortgage balances, mortgage-insurance costs, monthly payments, qualification margins and post-closing cash positions. For a first-time buyer, the right comparison is not “How much can I put down?” but “What happens to the whole household balance sheet after I put it down?”

Under current Canadian insured-purchase rules, an eligible owner-occupied 1–2 unit home below the insured purchase-price/lending-value ceiling can generally start with 5% on the first $500,000 and 10% on the portion above $500,000. A down payment below 20% normally requires mortgage default insurance. At 20% down, the mortgage becomes conventional from an LTV perspective and the borrower generally avoids that borrower-paid high-ratio insurance premium—but qualification and property/lender rules still apply.

First: 5% is not literally the minimum on every purchase price

A common shortcut says “you only need 5% down in Canada.” That becomes wrong above $500,000. For an eligible insured 1–2 unit owner-occupied purchase, the current minimum equity is 5% of the first $500,000 plus 10% of the remainder, and CMHC’s homeowner insured-purchase ceiling is below $1.5 million. At or above the insured ceiling, a high-ratio insured structure is not available through this program and a larger conventional down payment is normally required.

The $800,000 worked comparison: 5-ish minimum, 10% and 20%

Use an $800,000 owner-occupied home and a standard 25-year insured-amortization example. The exact contract rate and lender/insurer decision are not assumed here. The goal is to isolate the structural effect of different cash contributions. At this price, the statutory/program minimum is $55,000—not exactly 5%—because the amount above $500,000 requires 10% equity.

Ontario also applies provincial sales tax to the mortgage-insurance premium, and CMHC notes that this sales tax cannot be added to the insured loan amount. That makes the premium’s sales tax part of cash-to-close planning even when the premium itself is financed. On the simplified premiums above, 8% Ontario PST would be about $2,384 on the $29,800 premium and about $1,785.60 on the $22,320 premium. Confirm the actual insurer and closing calculation on the live file.

What the extra down payment really buys

What the extra down payment costs you

That is why 20% can be mathematically cheaper yet financially weaker for a particular household. A buyer with $170,000 total liquid savings should not automatically put $160,000 down on an $800,000 home and enter ownership with almost no reserve. The mortgage is only one liability; the household still has to survive normal life after funding.

Illustrative payment comparison

For illustration only, at a hypothetical 4.50% nominal mortgage rate with Canadian semi-annual compounding and a 25-year amortization, the approximate monthly payments on the financed balances above are about $4,288 on $774,800, $4,109 on $742,320 and $3,542 on $640,000. These are not current rate quotes and do not include property tax, heating, condo fees or other ownership costs. Use the Mortgage Payment Calculator with the actual rate and product.

The difference between the minimum structure and 20% down in this example is roughly $746 per month, but achieving it uses an additional $105,000 of upfront down payment before considering the insurance-PST difference. The correct decision asks what that $105,000 would otherwise do for the household and how long it would take to rebuild liquid reserves.

5% / minimum down can be rational when liquidity is the scarce resource

A smaller down payment can make sense when the buyer has stable income, the insured mortgage qualifies comfortably, and preserving cash has a clear purpose: emergency reserves, planned repairs, parental leave, self-employed working capital or avoiding higher-cost consumer debt after closing. Paying an insurance premium is a real cost, but so is becoming house-rich and cash-poor.

The structure becomes weaker when the buyer is using minimum equity because every dollar is already stretched, the resulting payment is uncomfortable, the property has foreseeable repair costs, or there is no emergency buffer. Minimum down payment is a financing threshold—not a declaration that the household can comfortably afford the home.

10% down is often a meaningful middle point—but not because 10 is a magic number

Ten percent can reduce the mortgage and may move the insurance premium into a lower LTV band, as the $800,000 example shows. But its value is file-specific. On some purchase prices, an extra dollar of down payment can cross a premium threshold or qualification limit; on others, it merely reduces principal. Use the Down Payment Planner and insurance calculator to find the actual breakpoints rather than targeting a round percentage for psychological comfort.

20% down changes the insurance structure, but not every underwriting rule

At 20% down, a conventional mortgage generally does not require borrower-paid high-ratio mortgage default insurance. That does not mean the lender stops checking income, debts, credit, down-payment source, property condition, appraisal, title or stress-test qualification. Nor does it guarantee a lower interest rate: insured, insurable and uninsured pricing grids can differ, and product features matter.

The 20% threshold should therefore be treated as a structural mortgage-insurance threshold, not a universal quality score. A well-capitalized 10% down buyer can be in a healthier household position than a 20% down buyer who emptied every account to reach the threshold.

25-year versus 30-year amortization is a separate decision

Do not mix down-payment percentage and amortization into one rule. CMHC Home Start currently allows up to a 30-year insured amortization where the high-ratio borrower is a first-time homebuyer or the property is newly built, subject to the program conditions. Longer amortization can reduce the required payment but increases interest exposure and can carry different insurance pricing. HopeWell’s Insured Mortgage Amortization page owns that decision in depth so this article does not duplicate it.

Cash beyond the down payment: the number most first-time buyers under-budget

A buyer needs more than the down payment. Ontario or Toronto land transfer tax after any valid first-time relief, legal fees/disbursements, title insurance where applicable, prepaid tax/utility/condo adjustments, insurance-premium PST, moving/setup costs and immediate repairs can all create additional cash needs. The lender may also require proof that funds are available and appropriately sourced.

The cleanest planning method is to start with total liquid resources, subtract a protected post-closing reserve, subtract estimated closing costs, and only then determine the maximum down payment available. Working backward from “I want 20% down” can hide the fact that there is no money left for the transaction itself.

FHSA and HBP can change the source of the down payment, not the underwriting math

CRA confirms that an eligible Home Buyers’ Plan withdrawal and a qualifying FHSA withdrawal can be used for the same qualifying home when both programs’ conditions are met. Those programs can materially increase available purchase cash. They do not change the lender’s need to verify the down-payment source and do not automatically make a higher purchase price affordable.

A strong plan compares three versions: buy with the minimum acceptable down payment while preserving reserves; use additional FHSA/HBP/savings to reduce the mortgage; or delay the purchase to reach a strategically important threshold. The HBP also creates future RRSP repayment obligations, so moving more money into today’s down payment can shift cost into tomorrow’s savings budget.

Decision framework: choose the down payment by constraint

Where buyers make the wrong comparison

Bottom line

The best down payment is the one that creates a financeable mortgage and leaves a resilient household afterward. Minimum/5%-style down preserves cash but carries a larger insured loan and premium. Ten percent can reduce both principal and the insurance rate band in some files. Twenty percent removes the high-ratio insurance requirement but consumes substantially more liquidity. Model all three with the actual purchase price, insurer, rate, amortization, closing costs and emergency reserve before deciding.