Down Payment Strategies Every First-Time Buyer in Ontario Should Know

If you’re working toward your first home, your down payment is the foundation that shapes everything. How much you have, how long it’s been in your account, and where it comes from all play a role in what lenders will offer you and how comfortably you can qualify.

Here’s what every first-time homebuyer in Ontario should understand before making the move in 2025.

1. Minimum Down Payment Rules in Canada

Canada uses a simple tiered system based on the price of the home.

• 5% on the first $500,000

• 10% on the amount between $500,000 and $1.5M

• 20% minimum for any home over $1.5M, since those properties can’t be insured

Example:A $700,000 purchase needs:5% of $500,000 + 10% of the remaining $200,000 = $45,000 down payment

If you put down less than 20%, you’ll need mortgage default insurance through CMHC, Sagen, or Canada Guaranty, which is added to your mortgage.

2. Accepted Sources for Your Down Payment

Here are the most common and lender-approved ways first-time buyers build their down payment.

Personal Savings or Investments

You’ll need at least three months of bank statements showing that your savings are your own. Large, unexplained deposits will create questions, so keep records for everything.

Gifted Funds From Family

Gifts must come from immediate family only. You’ll sign a gift letter confirming the funds are not a loan. The money must be in your account at least 15 days before closing.

RRSP Home Buyers’ Plan (HBP)

You can withdraw up to $60,000 tax-free from your RRSP. You’ll repay it over 15 years, starting in year five. Two buyers can each use the program, which means up to $120,000 combined.

First Home Savings Account (FHSA)

This is one of the strongest tools for first-time buyers. You can save up to $8,000 per year, to a maximum of $40,000. Contributions reduce your taxable income, and withdrawals for your first home are tax-free. You can combine the FHSA with the RRSP HBP. That’s up to $100,000 per person working toward your first home.

3. Borrowing Your Down Payment

Some buyers borrow their down payment through a personal loan, line of credit, or a cash-back mortgage. It’s possible, but it comes with conditions.

• The loan payment counts toward your debt ratios

• It reduces how much you can qualify for

• Some lenders won’t allow borrowed down payments on insured mortgages

Borrowing can help you bridge a gap, but it has to be structured carefully so it doesn’t weaken your approval.

4. Why Saving More Than the Minimum Matters

Aiming for the minimum is normal, but adding a little more can change your entire approval.

• Your mortgage insurance premium decreases

• Your monthly payment drops

• Your debt ratios improve

• Your stress test numbers become easier to pass

Even an extra $5,000 or $10,000 can give you stronger options and more comfort.

5. Create a Down Payment Plan That Works

Smart first-time buyers in Ontario build a plan that doesn’t rely on just one source.

• Open a FHSA and automate contributions

• Maximize RRSP deposits so you can benefit from the tax refund

• Create a separate savings account dedicated only to your home fund

• Check in monthly so you can track your progress

Consistency matters more than perfection. Building slowly and steadily gives you real strength when it’s time to buy.

The Bottom Line

Your down payment strategy shapes your first home purchase. When you know your options and use the right mix of programs, savings tools, and planning, you give yourself a head start and far less stress along the way.