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Posted On Mar 01, 2026

Down Payment Sources

Lazar Mortgages | Ontario Mortgage Guide

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If you’re buying a home in Ontario, one of the first questions you’ll ask is:

What’s my minimum down payment — and how does it affect my mortgage approval?

Your down payment doesn’t just determine how much you borrow. It impacts:

  • Whether mortgage insurance is required

  • Your interest rate options

  • Your monthly payment

  • Your overall approval strength

Let’s break it down clearly.

The 3 Down Payment Scenarios in Ontario

1️⃣ 5%–19% Down — “High-Ratio” (Insured) Mortgage

If your down payment is less than 20%, your mortgage is considered high-ratio.

Because the lender is financing more than 80% of the property’s value, you are required to purchase mortgage default insurance through:

  • Canada Mortgage and Housing Corporation

  • Sagen

  • Canada Guaranty

What this means:

  • Insurance protects the lender, not the borrower

  • The premium is added to your mortgage balance

  • You typically receive very competitive interest rates

Minimum Down Payment Rules in Ontario:

  • 5% on the first $500,000

  • 10% on the portion between $500,000–$999,999

  • 20% minimum on $1,000,000+ purchases

Insured mortgages are extremely common — especially for first-time buyers.

2️⃣ 20% or More — Conventional Mortgage

If you put down 20% or more, your mortgage is considered conventional.

Benefits:

  • No mortgage insurance premium

  • More lender flexibility

  • Potential access to extended amortizations (if applicable)

Because the loan-to-value is 80% or less, insurance is not required.

This option works well for:

  • Move-up buyers

  • Buyers using sale proceeds

  • Investors

3️⃣ Less Than 5% — Borrowed or “Flex-Down” Strategy

Technically, the minimum required down payment in Canada is 5%.

However, some borrowers with strong income and excellent credit may qualify to borrow their 5% down payment through an unsecured line of credit.

This strategy:

  • Is not as common as it once was

  • Requires strong debt ratios

  • Works best for stable, higher-income applicants

It’s not for everyone — but in high-rent Ontario markets, it can make sense in specific cases. We always run the numbers carefully before recommending it.

Where Can Your Down Payment Come From?

Lenders in Ontario require all down payment funds to be verified and traceable. Here are the acceptable sources:

💰 Cash Savings (Chequing, Savings, Investments)

If you’re using your own savings:

  • We need a 90-day history of the account

  • Statements must show your name and account number

  • Large deposits must be explained

This is the simplest and strongest form of down payment.

🎁 Gifted Down Payment (Immediate Family Only)

Gifted funds must:

  • Come from a direct family member

  • Be non-repayable

  • Be supported by a signed gift letter (we provide the template)

Lenders will also require proof the funds were transferred into your account.

Gifted down payments are extremely common in Ontario — especially in higher-priced markets like the GTA.

🏦 RRSPs – Home Buyers’ Plan

Through the federal Home Buyers’ Plan, you can withdraw up to $35,000 from your RRSP tax-free (per person) to use toward your down payment.

This program is administered by the Government of Canada and allows:

  • Up to 15 years to repay the funds

  • No immediate tax if repaid within guidelines

We’ll require:

  • RRSP withdrawal documentation

  • Your RRSP statement

Important note:
If you withdraw RRSP funds outside the Home Buyers’ Plan eligibility rules, your financial institution will withhold up to 30% for taxes.

🏠 Borrowed Against an Existing Property

If you already own a home, you may be able to:

  • Refinance

  • Access a HELOC

  • Use available equity

We’ll require:

  • Current mortgage statement

  • Confirmation of available equity

This is common for move-up buyers in Ontario.

🔄 Sale Proceeds from an Existing Property

If you’re selling and buying at the same time:

We will need:

  • Firm sale agreement

  • Current mortgage statement

  • Proof of deposit of sale proceeds

If your purchase closes before your sale, we can arrange short-term bridge financing to cover the gap.

💳 Unsecured Line of Credit

Some borrowers qualify to borrow their 5% down payment from an unsecured line of credit.

We carefully review:

  • Your income

  • Existing debts

  • Monthly obligations

  • Stress test qualification

This strategy increases your debt ratios — so it must be structured properly.

How Your Down Payment Affects Your Application

Your down payment impacts:

✔ Approval Strength

Higher down payments reduce lender risk.

✔ Monthly Payment

More down = smaller mortgage = lower payment.

✔ Interest Rate Options

Insured mortgages (under 20%) often receive some of the most competitive rates in Canada.

✔ Overall Flexibility

Conventional mortgages (20%+) allow for more customization.

Final Thoughts from Lazar Mortgages

There’s no one-size-fits-all answer when it comes to down payments.

The “right” strategy depends on:

  • Your income

  • Your credit

  • Your long-term goals

  • Ontario market conditions

  • Whether you’re buying to live or invest

At Lazar Mortgages, we don’t just tell you the minimum — we show you what makes the most strategic sens

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