Mortgage down payment calculator

But how much will you need to save to cover the down payment on a property? While there are minimum down payment rules set out by the government of Canada, it ultimately comes down to the cost of the home you plan to purchase. 

What’s a mortgage down payment? 

Many people don’t have enough money on hand to cover the full cost of buying a home. When this happens, the buyers are still expected to pay a set amount upfront. This is known as the down payment. The amount you’ll need for the down payment depends on the purchase price and the minimum down payment rules set out by the government of Canada. 

The down payment represents only a fraction of the cost of home ownership. If you’re unable to cover the entire cost of the property, you’ll have to apply for a mortgage, a kind of specialized loan, to cover the remaining balance, which you will pay back with interest over time. 

Because the size of your mortgage is calculated by subtracting the down payment amount from the total purchase price, the bigger your down payment, the smaller your loan, which will save you tens of thousands of dollars in interest charges over the course of the mortgage. 

If your down payment is less than 20% of the home’s value, you’ll also be required to get mortgage loan insurance, with premiums that typically range from 0.6% to 4.5% of your mortgage amount. 

Using a mortgage down payment calculator is a good way to better understand how the size of your down payment will affect your mortgage payments down the road. 

How to calculate your mortgage down payment

In Canada, the minimum amount you’ll need to provide as a down payment depends on the purchase price of the home. 

• If the purchase price of the home is less than $500,000, your minimum down payment is 5% of the purchase price.
• If the purchase price ranges anywhere between $500,000 and $1 million, the minimum down payment is 5% of the first $500,000, and 10% of the portion above $500,000.
• If the purchase price is $1 million or more, you must have a minimum down payment of at least 20%.

For example, if the purchase price of the home you’re interested in is $450,000, you could put down as little as 5% as your down payment, which would be equal to $22,500.

For a home with a purchase price of $700,000, you must calculate your minimum down payment by adding up two amounts. The first amount would be 5% on the first $500,000, which is $25,000. The second amount is 10% of the remaining $200,000, which is equal to $20,000. Added together, you get $45,000, meaning you would need to provide a down payment of at least $45,000 for a house valued at $700,000.

For homes worth $1 million or more, you must pay 20% on the full amount. In plain terms, you can’t purchase a home of that value in Canada unless you have at least $200,000 saved up or built as equity into an existing property that you intend to sell. 

What is mortgage default insurance? 

In Canada, if you buy a home with a down payment of less than 20% of the purchase price, you’ll have to pay for mortgage default insurance (sometimes referred to as CMHC insurance). 

Mortgage default insurance is required to protect lenders in the event you stop making mortgage payments and default on your loan. With mortgage default insurance, your premium is calculated as a percentage of the mortgage amount. The bigger your down payment, the less you will have to pay in insurance. 

Our mortgage calculator allows you to see how much you can save in premiums by having a down payment of at least 20%. 

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About Sandra MacGregor

Sandra MacGregor has been writing about personal finance, mortgages, investing and credit cards for over a decade.

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