Everything You Need to Know About Down Payments

Buying a home is one of the biggest financial decisions you'll ever make—and one of the first steps in that journey is understanding the down payment. If you're a first-time home buyer or just need a refresher, this guide will walk you through what a down payment is, how much you need, where it can come from, and what lenders are looking for.

Whether you're eyeing a downtown Vancouver condo or a cozy townhouse in Kelowna, having the right information about down payments can help you prepare with confidence.

What is a Down Payment?

A down payment is the initial lump sum you pay upfront when buying a property. It’s your stake in the home—the rest is typically financed through a mortgage.

In Canada, the down payment must come from your own resources or an eligible source, and the amount you need depends on the purchase price of the property.

Minimum Down Payment Requirements in Canada

The minimum down payment is set by the federal government and applies across the country. Here's how it breaks down:

• 5% of the purchase price up to $500,000

• 10% for the portion of the purchase price above $500,000 and up to $1,499,999

• 20% for homes priced at $1.5 million or more.

Example:

If you’re buying a $750,000 condo in Victoria:

• 5% of the first $500,000 = $25,000

• 10% of the next $250,000 = $25,000

• Total minimum down payment = $50,000

Important:

If you put down less than 20%, your mortgage is considered high-ratio and must be insured through a mortgage default insurance provider like CMHC, Sagen, or Canada Guaranty.

A quick note and myth bust:

If you're purchasing a primary residence, you do not need 20% down. No one really knows where this myth comes from, but you do not need to be a first-time home buyer to put a minimum of 5% down #yay!

Where Can Your Down Payment Come From?

Lenders in BC allow several acceptable sources for your down payment. These include:

• Personal Savings

  The most common and straightforward option. Funds must be in your account for at least 90 days to be considered "your own resources."

• RRSP (Home Buyers’ Plan)

  First-time buyers can withdraw up to $60,000 tax-free from their RRSP to use toward their down payment. You have 15 years to repay this amount, and you don't have to start paying it back until after the first year.

• Gifts from Immediate Family

  A gift letter is required stating the money is a true gift and does not need to be repaid. The funds must be in your account before the closing date.

• Sale of an Existing Property

  Proceeds from the sale of your current home can be used as a down payment. Lenders will need documentation, such as a signed purchase agreement and mortgage statement.

• Investments or Other Assets

  You can cash out investments or other financial assets, but be prepared to provide paperwork showing where the funds came from.

What Do Lenders Look for?

Lenders aren’t just looking for money—they’re looking for financial responsibility. Here’s what they’ll typically want to see:

• Proof of Down Payment

  Bank statements (usually covering the last 90 days) or investment account records.

• Consistency

  A steady pattern of saving, or a lump sum with a clear paper trail.

• Source Verification

  Lenders must verify that all funds are from legitimate, acceptable sources.

Why the Down Payment Matters

• Bigger down payment = smaller mortgage = less interest paid overall

• Avoid mortgage insurance by putting down 20% or more

• Can strengthen your mortgage application

• Depending on your loan amount, can reduce your monthly payments.

Tips to Boost Your Down Payment Savings

Set up a separate savings account just for your down payment

• Automate monthly savings contributions

• Cut non-essential spending

• Take advantage of tax refunds, bonuses, or side hustle income

• Consider First Home Savings Accounts (FHSA)—a tool that combines tax-free contributions and withdrawals for first-time home purchases.

Bonus: First-Time Home Buyer Incentives in BC

If you're a first-time home buyer, you may be eligible for a Property Transfer Tax Exemption. In BC, first-time home buyers can get an exemption from the property transfer tax for homes under $500,000 (with partial exemptions up to $835,000). The property must meet certain requirements. Read more here: https://www2.gov.bc.ca/gov/content/taxes/property-taxes/property-transfer-tax/exemptions/first-time-home-buyers.

Final Thoughts: Start With the Right Plan

Saving for a down payment may seem overwhelming, but with the right strategy and guidance, it's absolutely achievable.

I work with clients daily to help them understand their financing options, get pre-approved, and move into their own homes. Whether you're buying your first condo or upgrading to a townhouse, I'm here to make the mortgage process clear and stress-free.

Ready to talk about your down payment options? Let’s build a plan that fits your lifestyle and budget. Contact me for a free, no obligation mortgage consultation. Always happy to chat mortgages.

Nadia.