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Your Key to Homeownership: Deciphering Down Payments, Mortgage Insurance, and More

  • sasha540
  • Jul 24
  • 5 min read

Updated: Aug 2


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Ladies and gentlemen, today, we're delving deep into real estate market financing, where the dream of homeownership can become a reality. We're tackling the nitty-gritty details of down payments, mortgage insurance, and some incredible programs and incentives for homebuyers. So, grab your notepad because this is your guide to unlocking homeownership.

 

How Much You Need for a Down Payment


Let’s start with the big question on every aspiring homeowner's mind – how much do you need for a down payment? The good news is that you don’t need a mountain of cash to get started. The minimum down payment required depends on the purchase price of your home:


  • For homes priced at $500,000 or less: You’ll need at least 5% of the purchase price.

  • For homes priced between $500,000 and $1,499,999: You’ll need 5% of the first $500,000, plus 10% of the portion above $500,000.

  • For homes priced at $1.5 million or more: You’ll need at least 20% of the purchase price.


Additionally, if your down payment is less than 20%, you’ll typically need to buy mortgage loan insurance, which protects the lender if you can’t make your mortgage payments. This insurance is now available for homes priced up to $1.5 million. However, mortgage insurance isn’t available for homes priced above $1.5 million — so you’ll need to put down at least 20% if your purchase price exceeds this amount.

 

What Is a Minimum Down Payment


The minimum down payment is like your golden ticket into homeownership. It's the lowest amount you must pay to secure your dream home. In, the minimum down payment varies:


If the Purchase Price of Your Home Is $500,000 or Less:


For homes with a purchase price of $500,000 or less, the minimum down payment is 5% of the purchase price. If you're eyeing a $400,000 house, you'd need to come up with a minimum down payment of $20,000.


If the Purchase Price of Your Home Is More than $500,000 (up to $1M):


The rules change slightly if you're aiming for a property that costs more than $500,000. You'll need to put down 5% of the first $500,000 and 10% on the portion above $500,000. Your minimum down payment for a $600,000 home would be $35,000 ($25,000 for the first $500,000 and $10,000 for the remaining $100,000).


Example: How to Calculate Your Minimum Down Payment


Let's break it down with an example. Say you've found your dream home priced at $550,000. To calculate your minimum down payment:

5% on the first $500,000: $25,000 (0.05 X $500,000 = $25,000)

10% on the remaining $50,000: $5,000 (0.01 X $50,000 = $5,000)

Total Minimum Down Payment: $25,000 + $5,000 = $30,000

Your minimum down payment for a $550,000 home would be $30,000. Your entry fee to the homeownership club.


What Is Mortgage Loan Insurance


Mortgage loan insurance is like a safety net for lenders. In Canada, you must get mortgage loan insurance if your down payment is less than 20% of the home’s purchase price. This insurance protects the lender (not you) if you can’t make your mortgage payments.


Cost of Mortgage Loan Insurance


The cost of mortgage loan insurance depends on the size of your down payment and the price of your home. It’s a one-time premium that’s added to your mortgage and paid off over time.


As of 2025, typical premium rates are:

  • 5%–9.99% down payment: 4.00% of your mortgage amount

  • 10%–14.99% down payment: 3.10%

  • 15%–19.99% down payment: 2.80%

  • 20% or more: No insurance required


Example: If you buy a home with a $300,000 mortgage and only put 5% down, the insurance premium could be 4%, which is $12,000. This amount gets added to your mortgage balance.


How the Down Payment Affects the Total Cost of Your Mortgage


Your down payment size has a big impact on how much your mortgage costs overall. A smaller down payment means a bigger mortgage, a bigger insurance premium, and more interest over time.


Example: Down Payment Scenarios

Let’s say you’re buying a $500,000 home:


Scenario 1:

  • Down payment: 5% → $25,000

  • Mortgage loan insurance: Required

  • Insurance premium: About 4% of $475,000 = $19,000

  • Result: You pay more each month and more interest over the life of the mortgage.


Scenario 2:

  • Down payment: 20% → $100,000

  • Mortgage loan insurance: Not required

  • Result: No insurance premium, lower mortgage balance, and less interest paid — which could save you thousands of dollars over the life of the mortgage.

 

Home Buying Programs, Plans, and Incentives


Let’s move on to some exciting stuff — home-buying programs, plans, and incentives that can help you on your homeownership journey.


Home Buyers' Plan (HBP):


The Home Buyers' Plan is like your secret weapon. It allows you to withdraw up to $60,000 from your RRSP to buy or build your first home without paying tax on the withdrawal. It’s like turbocharging your down payment. Starting in 2024, you also get 5 years before you have to start repaying what you borrowed back into your RRSP.


First-Time Home Buyer Incentive:


The First-Time Home Buyer Incentive (FTHBI) was a government program that helped first-time buyers by offering a shared equity mortgage. It allowed buyers to reduce monthly mortgage payments without increasing their down payment, but the government shared in the home’s equity when it was sold. The program was discontinued as of March 31, 2024, with no new applications accepted after March 21, 2024.


Alternatives:

  • First-Time Home Buyers’ Tax Credit: A tax credit now worth up to $1,500.

  • First Home Savings Account (FHSA): Save up to $40,000 tax-free toward your first home.

  • Provincial Programs: Land transfer tax rebates and other regional incentives depending on where you live.


Recent changes include a new 30-year mortgage amortization option for insured mortgages on newly built homes for first-time buyers (starting August 2024) and an increase in the HBP limit to $60,000 (effective April 2024). 


The Bottom Line


Down payments, mortgage insurance, and government programs are crucial in the real estate puzzle. With the proper knowledge and planning, homeownership can be within reach. So, whether you're calculating your minimum down payment or exploring incentives, remember that the dream of homeownership is alive and well.


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I am a Victoria-based local realtor with eXp Realty. My commitment to honesty, integrity, loyalty, and hard work have been essential pillars for me because they drive a high standard of excellent service for my clients. Helping you realize your dream is my goal!


I service Vancouver Island, but my focus is on Victoria, Sooke, Saanich, Malahat, Shawnigan Lake, Cobble Hill, Duncan, and the rest of the Cowichan Valley.



 
 
 

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