The Heartbreaking Truth of the 20% Down Payment

Thinking about buying your first home but feeling overwhelmed by the idea of saving a 20% down payment? You’re not alone — high down payments are one of the biggest misconceptions holding many prospective buyers back.

What if I told you that the traditional 20% down payment isn’t always necessary? In fact, you can buy a home in Canada with as little as 5% down.

Let’s bust this myth wide open and break down exactly how much you really need to get into your dream home.

Why The 20% Down Payment Myth is Holding You Back

For many Canadians, especially first-time home buyers in Hamilton and other cities, the belief that you need a massive 20% down payment is intimidating. It creates a huge barrier to homeownership, often making people think it’s impossible to enter the market anytime soon.

But here’s the truth: the actual minimum down payment rules in Canada are more flexible than you might expect.

The Real Minimum Down Payment Requirements in Canada

Here’s how down payments really work based on your home’s purchase price:

• For Homes under $500,000: You only need 5% down.
• Homes between $500,000 and $1.5 million: You pay 5% on the first $500,000, plus 10% on the portion above $500,000.
• Homes over $1.5 million: A full 20% down payment is required.

For most first-time buyers in Hamilton, that means your down payment will likely fall between 5% and 7% — a much more achievable target than the intimidating 20% figure.

The Catch: Mortgage Default Insurance (CMHC Insurance)

So, what’s the catch with putting down less than 20%? You’ll need to purchase mortgage default insurance. Often called CMHC insurance, though there are other providers as well, this insurance protects the lender if you default on your mortgage — not you as the borrower.

This insurance comes with a one-time premium, which is added to your mortgage amount rather than paid upfront. It might sound like a penalty, but it’s actually a tool that makes homeownership more accessible.

How Much Does Mortgage Insurance Cost?

The cost of mortgage insurance depends on your down payment as a percentage of your home’s price. The smaller your down payment, the higher the premium:

• 5% down: Approximately 4% premium on your mortgage
• 10% down: Around 3.1% premium

Here’s a calculator you can use to calculate your exact CMHC premium based on the property’s purchase price and your down payment.

While these prices might seem expensive, it’s what enables you to get into the market sooner without waiting years to save a huge lump sum.

The Surprising Advantage of Mortgage Insurance

Here’s a fact many don’t realize: because an insured mortgage is less risky for banks, lenders often offer lower interest rates on these mortgages compared to uninsured ones. Sometimes, the savings on your interest rate can actually offset the cost of the mortgage insurance premium within the first five years of your mortgage.

So rather than viewing mortgage insurance as a burden, think of it as a helpful stepping stone towards homeownership that can actually save you money.

Pros and Cons: Smaller vs. Larger Down Payments

Pros of a Smaller Down Payment

• Get into the housing market faster and start building equity sooner.
• Avoid delaying homeownership while saving a large lump sum.
• Benefit from potentially lower interest rates due to mortgage insurance.

Cons of a Smaller Down Payment

• Higher mortgage amount and monthly payments.
• Must pay mortgage insurance premiums, increasing your overall mortgage cost.

Pros of a 20% (or Larger) Down Payment

• Avoid paying mortgage insurance premiums altogether.
• Smaller mortgage amount, which means lower monthly payments.

Cons of a 20% Down Payment

• It can take many years to save this amount, potentially missing out on market appreciation.
• Home prices may rise faster than your savings, making your target harder to reach.

Take Control of Your Home Buying Journey

Deciding how much to put down on your home is a major financial decision — one that deserves careful planning and accurate information.

To help you navigate this process, I’ve created a FREE First-Time Home Buyer’s Guide that includes a savings plan worksheet, a detailed breakdown of all the costs involved in buying a home, and a mortgage insurance calculator so you can see how different down payment amounts impact your finances.

Download your FREE First-Time Home Buyer’s Guide here and start planning your path to homeownership today!

What’s Next? Understanding the Mortgage Stress Test

Once you know your down payment, the next hurdle is passing the mortgage stress test — a crucial factor in qualifying for your mortgage. I’ve put together a comprehensive guide that explains how the 2026 mortgage stress test works and tips on how to pass it successfully.

Don’t Let the 20% Myth Hold You Back

Remember, you don’t need to wait years to save a 20% down payment to buy a home in Hamilton or anywhere in Canada. With as little as 5% down and a clear understanding of mortgage insurance, you can get into the market sooner and start building your future.

If you have questions or want personalized advice, feel free to reach out — I’m here to help make your home buying journey smarter, smoother, and stress-free.

Ready to take the next step? Download your free guide and start your journey to homeownership today!

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Thinking to drive just a little bit beyond Hamilton and stretch your homeowner dollar even farther? Check out Caledonia Real Estate: 5 Reasons Why Everyone’s So Excited About It

Wondering about the changes in real estate legislation in Ontario? Check out the amazing consumer resources on RECO’s website.