How to Save for a Down Payment in Canada: 7 Steps

Saving for a home can feel like aiming at a target that keeps moving.

Home prices change. Mortgage rates affect what you can afford. Closing costs vary by province and property. Meanwhile, advice such as “stop buying coffee” does little to explain how someone can realistically save tens of thousands of dollars.

A useful plan begins with three questions:

What purchase price could you comfortably afford?
How much cash would you need before closing?
Which accounts and savings strategy fit your timeline?

This guide explains how to save for a down payment in Canada without treating the minimum required amount as your entire home-buying budget.

How much down payment do you need in Canada?

Canada’s minimum down-payment rules depend on the purchase price.

Purchase price	Minimum down payment
$500,000 or less	5% of the purchase price
More than $500,000 but less than $1.5 million	5% of the first $500,000, plus 10% of the portion above $500,000
$1.5 million or more	20% of the purchase price

These are the federal minimums described by the Financial Consumer Agency of Canada. A lender may require more based on the property, your credit history, your income or the source of the down payment.

Examples of minimum down payments

For a $500,000 home:

5% × $500,000 = $25,000

For a $700,000 home:

5% of the first $500,000 = $25,000
10% of the remaining $200,000 = $20,000
Minimum down payment = $45,000

For a $1 million home:

5% of the first $500,000 = $25,000
10% of the remaining $500,000 = $50,000
Minimum down payment = $75,000

For a $1.5 million home:

20% × $1.5 million = $300,000

The federal government increased the price ceiling for insured mortgages from $1 million to $1.5 million in December 2024. This change allows eligible buyers to purchase a home below $1.5 million with less than 20% down.

The minimum down payment is not your complete target

If a home requires a $45,000 minimum down payment, saving exactly $45,000 will probably leave you short.

You may also need money for:

land transfer or property transfer taxes;
legal or notary fees;
a home inspection;
title insurance;
an appraisal;
property-tax and utility adjustments;
provincial tax on a mortgage-insurance premium, where applicable;
moving expenses;
immediate repairs or purchases;
an emergency reserve after closing.

The Financial Consumer Agency of Canada suggests preparing for closing costs of approximately 1.5% to 4% of the purchase price. The actual amount depends heavily on the province, municipality and property.

For a $700,000 home, that broad estimate would represent approximately $10,500 to $28,000, in addition to the down payment.

Some first-time buyers qualify for rebates or credits that reduce particular expenses. However, it is safer to confirm those benefits separately rather than subtracting them from your target before you know you qualify.

What happens if you put down less than 20%?

If your down payment is below 20%, you will generally need mortgage loan insurance.

This insurance protects the lender if you cannot make your mortgage payments. It does not protect you as the borrower.

The premium depends on the percentage of the home price that you borrow. Under CMHC’s current premium schedule, a mortgage representing more than 90% and up to 95% of the property value normally carries a premium equal to 4% of the mortgage amount.

Suppose you buy a $500,000 home with a 5% down payment:

Purchase price: $500,000
Down payment: $25,000
Mortgage before insurance: $475,000
CMHC premium at 4%: $19,000
Mortgage after adding the premium: $494,000

The premium is usually added to the mortgage, so you do not necessarily pay the $19,000 in cash at closing. However, it increases the amount borrowed and the interest paid over time.

Ontario, Quebec and Saskatchewan also apply provincial sales tax to mortgage-insurance premiums. That tax cannot be added to the mortgage and normally has to be paid separately.

Should you aim for 5%, 10% or 20%?

A 20% down payment avoids mortgage loan insurance and reduces the amount you need to borrow. That can lower your monthly payment and the total interest cost.

However, waiting until you reach 20% is not automatically the best decision for every buyer.

During the additional saving period:

home prices could rise or fall;
mortgage rates could change;
your rent and other expenses continue;
your income or desired location could change;
the purchase could become less urgent or more urgent.

A smaller down payment may allow you to buy earlier, but it creates a larger insured mortgage and leaves less equity in the home. A larger down payment reduces borrowing, but accumulating it may take several additional years.

The right target depends on your complete financial position. Compare several down-payment amounts instead of assuming that either the minimum or 20% is always ideal.

Step 1: Start with an affordable home price

Do not build your plan around the most expensive home a lender might approve.

Mortgage qualification is a lending decision. It does not know how much you value travel, retirement savings, childcare, career flexibility or other goals.

According to the Financial Consumer Agency of Canada, CMHC’s general guidelines suggest:

monthly housing costs of no more than about 39% of gross monthly income;
total monthly debt obligations of no more than about 44% of gross monthly income.

These are qualification guidelines, not a guarantee that the resulting payment will feel comfortable.

Before choosing your price range, estimate the complete monthly cost of ownership:

mortgage payment;
property taxes;
heating and utilities;
home insurance;
condominium fees, if applicable;
routine maintenance;
repairs;
commuting or transportation changes.

Leave room for interest-rate increases at renewal and for irregular costs that do not appear in a standard mortgage calculator.

Step 2: Calculate your complete savings target

Use this formula:

Down payment + estimated closing costs + moving costs + post-purchase reserve − current home savings = remaining target

For example, suppose you are considering a $600,000 home.

The minimum down payment would be:

5% of the first $500,000: $25,000
10% of the remaining $100,000: $10,000
Total minimum down payment: $35,000

Assume you choose a planning estimate of $15,000 for closing and moving costs and want to retain a $10,000 emergency reserve.

Your target becomes:

$35,000 + $15,000 + $10,000 = $60,000

If you have already saved $12,000, you still need $48,000.

Over four years, before considering interest or investment returns:

$48,000 ÷ 48 months = $1,000 per month

This calculation turns “save for a home” into a specific amount and timeline. If the required monthly savings are unrealistic, you can adjust the purchase price, timeline, down payment or another part of the plan.

Step 3: Consider opening an FHSA early

For an eligible first-time buyer, the First Home Savings Account is usually the first account worth examining.

An FHSA combines two valuable tax features:

eligible contributions are generally deductible from taxable income;
qualifying withdrawals for a first home are tax-free and do not need to be repaid.

Your FHSA participation room begins only after you open your first account. Opening one with a small contribution can therefore be useful even if you cannot contribute the maximum immediately.

Under the current FHSA rules:

participation room is $8,000 in the first year you open an FHSA;
you receive up to $8,000 of additional room in subsequent years;
the regular lifetime contribution limit is $40,000;
up to $8,000 of unused participation room can generally be carried forward to the following year.

For example, if you open an FHSA and contribute $3,000 in the first year, you may have up to $13,000 of room the following year: the new $8,000 plus $5,000 carried forward.

A qualifying withdrawal may include the account’s investment growth, so the amount withdrawn can exceed your contributions.

If two people purchase a home together and both qualify, each can use their own FHSA.

What if you do not buy a home?

Subject to the rules, unused FHSA property can generally be transferred directly to an RRSP or RRIF without immediately paying tax and without requiring regular RRSP contribution room.

An FHSA does not remain open indefinitely. Its maximum participation period generally ends at the earliest applicable deadline, including the fifteenth anniversary of opening your first FHSA, the year you turn 71 or the year following your first qualifying withdrawal.

Because the eligibility and withdrawal definitions contain details, verify your circumstances through the CRA’s FHSA guidance.

Step 4: Decide whether to use the Home Buyers’ Plan

The Home Buyers’ Plan allows an eligible person to withdraw up to $60,000 from an RRSP to buy or build a qualifying home.

A couple could potentially withdraw up to $120,000 if both partners qualify and have enough money in their respective RRSPs.

You can use the Home Buyers’ Plan and make a qualifying FHSA withdrawal for the same home, provided you meet the conditions for both programs.

Unlike a qualifying FHSA withdrawal, an HBP withdrawal must generally be repaid to your RRSP over 15 years. If you do not make a required repayment, the missing amount is normally included in your taxable income.

As of 2026, temporary relief applies to people making their first HBP withdrawal from 2026 through 2028: the start of the 15-year repayment period is deferred until the fifth year following the withdrawal year. Because this date-specific measure may change, verify the applicable repayment schedule before withdrawing.

An RRSP contribution is not automatically free money

An RRSP contribution may produce a tax deduction, but the HBP works best when it fits your broader retirement and tax plan.

Consider:

your current and expected future tax rates;
whether you already have RRSP savings;
the effect of removing money from long-term investments;
your ability to make future HBP repayments;
whether new contributions must remain in the RRSP for a minimum period before an eligible withdrawal.

Do not contribute borrowed money to an RRSP solely to manufacture a larger down payment without understanding the debt, tax and timing consequences.

Step 5: Use a TFSA for flexibility

A TFSA contribution does not provide a tax deduction. However, eligible investment growth and withdrawals are generally tax-free.

A TFSA can complement an FHSA because:

withdrawals do not need to be repaid;
the money is not limited to a home purchase;
withdrawn amounts are generally added back to your contribution room in the following calendar year;
it can hold savings that exceed your FHSA room.

Before contributing, verify your available TFSA room. Overcontributions can result in tax.

An FHSA will often have the stronger tax treatment for an eligible first-time buyer, but a TFSA can provide more flexibility if your plans may change.

Step 6: Match the investment risk to your timeline

A down payment is different from retirement savings. You may need the entire amount on a specific date.

If your purchase is expected within the next few years, protecting the money is usually more important than maximizing its potential return.

Options may include:

a high-interest savings account;
an FHSA or TFSA savings account;
a cashable or short-term guaranteed investment certificate;
a GIC ladder matched to your expected purchase date.

Deposit protection depends on the institution, product and account structure, so confirm whether the deposit is eligible for CDIC or provincial deposit insurance.

Stocks and equity ETFs can lose a substantial amount over a short period. Bond ETFs can also decline when interest rates change. An investment can be diversified and still be unsuitable for money you will need soon.

A practical framework is:

Purchase within one to three years: prioritize stability and access to the money.
Purchase in three to five years: keep most or all of the required amount in conservative holdings, especially if the purchase date is firm.
Purchase more than five years away: some investment risk may be reasonable if your timeline and purchase plans are flexible.

As the purchase approaches, gradually move the amount you cannot afford to lose into safer holdings.

Step 7: Automate a realistic savings system

Once you know the monthly amount required, automate it after each payday.

For example:

transfer a fixed amount to your FHSA;
direct any remaining home savings to your TFSA or savings account;
send part of tax refunds, bonuses or other irregular income to the goal;
review your progress every three months.

A simple paycheque routine can make this process easier because the money moves before it becomes available for everyday spending.

You can also divide the target into milestones:

initial emergency fund;
first $8,000 FHSA contribution;
minimum down payment;
closing-cost reserve;
post-purchase emergency reserve;
optional increase toward a larger down payment.

Milestones make a large target easier to measure without hiding the final cost.

Should you save for a home while carrying debt?

The answer depends on the type and cost of the debt.

High-interest credit-card debt can grow faster than safe down-payment savings. It also affects cash flow and may reduce the mortgage amount for which you qualify.

A low-interest student loan presents a different decision. You may be able to make the required payments while saving toward your home, although the payment still forms part of your debt load.

Compare:

the interest rate;
the required monthly payment;
the effect on mortgage qualification;
your emergency savings;
the value of any employer match;
FHSA room and your home-buying timeline.

Avoid draining all available cash to eliminate low-cost debt if doing so would leave you unable to handle an emergency.

Do not use every dollar for the purchase

Closing with no cash remaining creates a fragile start to homeownership.

A furnace, appliance or plumbing problem does not wait until you rebuild your savings. Condominium owners can also face special assessments, moving costs and purchases that were not obvious before closing.

Your emergency reserve should be separate from the down payment and expected closing costs. The appropriate amount depends on the property, your income stability, insurance coverage and access to other resources.

If using the minimum down payment would leave nothing for closing or emergencies, you may not have reached your real target yet.

Common down-payment mistakes

Saving only the legal minimum

The down payment is only one part of the cash required. Closing, moving and immediate ownership costs need separate funding.

Investing too aggressively

A market decline shortly before closing can force you to postpone the purchase, reduce the down payment or sell investments at a loss.

Waiting to open an FHSA

FHSA participation room only starts after you open your first account. Waiting can reduce how much room you accumulate before buying.

Treating a tax refund as guaranteed profit

A deduction may reduce your tax, but the result depends on your income and tax situation. A refund also reflects tax previously paid or withheld; it is not a separate return on the investment.

Using the maximum mortgage approval as a spending target

A lender’s maximum may leave little room for maintenance, retirement savings, childcare, travel or higher payments at renewal.

Forgetting the HBP repayment obligation

An HBP withdrawal helps with the purchase but creates future RRSP repayment requirements. Include those repayments in your post-purchase budget.

Emptying the emergency fund

Using every available dollar may help you close sooner, but it leaves you exposed immediately after taking on a large financial obligation.

A simple home-savings plan

Here is a practical order of operations:

Estimate a home price that fits your complete monthly budget.
Calculate the minimum down payment.
Add 1.5% to 4% as an initial closing-cost estimate.
Add moving expenses and a post-purchase reserve.
Subtract the money already saved.
Divide the remaining amount by the number of months before your target purchase.
Open and fund an FHSA if you qualify.
Use a TFSA or suitable savings account for additional flexibility.
Evaluate the HBP in the context of your retirement and tax plan.
Reduce investment risk as the purchase approaches.
Review the plan whenever home prices, income, interest rates or your timeline change.

Frequently asked questions

How long does it take to save for a down payment?

Divide the amount you still need by the amount you can save each month.

If you need another $48,000 and can save $1,000 per month, the simple estimate is four years. Interest, investment returns, tax savings and changes in your contributions may alter the result.

Can I use both an FHSA and the Home Buyers’ Plan?

Yes. You may use a qualifying FHSA withdrawal and an HBP withdrawal for the same qualifying home if you meet the conditions for both programs.

The FHSA withdrawal does not need to be repaid. The HBP withdrawal generally does.

Can my down payment be a gift?

Some lenders accept gifted down payments, commonly from immediate family, but documentation and insurer requirements apply. Confirm the rules with your lender or mortgage professional before relying on a gift.

Is a 20% down payment always better?

It avoids mortgage loan insurance and reduces the amount borrowed. However, accumulating 20% can delay the purchase and may not be the best use of all your available cash.

Compare the insurance cost, mortgage size, timeline and amount remaining after closing.

Where should I keep my down payment?

The right location depends mainly on when you expect to buy.

Money needed within a few years is generally better suited to stable and accessible options such as an insured savings account or appropriately timed GICs. A longer and flexible timeline may permit some investment risk.

Can I withdraw all the money in my FHSA for a home?

If you meet the qualifying-withdrawal conditions, you can generally withdraw the property in your FHSAs tax-free for the qualifying purchase. The withdrawal is not limited to the $40,000 lifetime contribution amount because it may also include investment growth.

The takeaway

Saving for a down payment is not simply about reaching 5% or 20%.

Your real target includes the down payment, closing expenses, moving costs and enough cash to remain financially stable after receiving the keys.

Start with an affordable purchase price. Open an FHSA early if you qualify. Use the TFSA and Home Buyers’ Plan where they fit, and protect money that you will need soon from unnecessary market risk.

A home purchase should support your financial life. It should not require you to use every dollar you have just to complete the transaction.

This article provides general educational information and does not constitute financial, mortgage, tax or legal advice. Eligibility rules and government programs can change. Verify current requirements with the CRA, the Financial Consumer Agency of Canada, your lender and the appropriate provincial authorities before acting.

How to Save for a Down Payment in Canada