The down payment needed for a conventional mortgage is straightforward in most home purchases: you generally need enough equity so that the mortgage is no more than 80% of the property’s lending value. For a conventional mortgage in Canada, you generally need a down payment of at least 20% of the home’s purchase price. A 20% down payment leaves you borrowing 80%, which places the mortgage within the conventional mortgage threshold. You can also put down more than 20%.
- How to Calculate a 20% Conventional Mortgage Down Payment
- What Happens If You Put Down Less Than 20%?
- Why Does 20% Matter?
- Can You Put More Than 20% Down?
- What If the Home Costs $1.5 Million or More?
- Does Having 20% Down Guarantee a Conventional Mortgage?
- Questions About Conventional Mortgage Down Payments
How to Calculate a 20% Conventional Mortgage Down Payment
Multiply the home’s purchase price by 20% to estimate the down payment needed when the purchase price and lending value are the same.
| Home price | 20% down payment | Mortgage before other financed amounts |
|---|---|---|
| $300,000 | $60,000 | $240,000 |
| $500,000 | $100,000 | $400,000 |
| $750,000 | $150,000 | $600,000 |
| $1,000,000 | $200,000 | $800,000 |
| $1,500,000 | $300,000 | $1,200,000 |
For example, a $750,000 home with $150,000 down leaves a $600,000 mortgage. The resulting loan-to-value ratio is 80%, which is the upper boundary for a conventional mortgage. CMHC similarly uses a 20% down payment when illustrating the difference between conventional financing and its insured CMHC Purchase option.
The reason the percentage matters becomes clearer when looking at what a conventional mortgage is in Canada. The classification is based on the mortgage’s loan-to-value ratio rather than simply the dollar amount of the down payment.
What Happens If You Put Down Less Than 20%?
Putting less than 20% down generally results in a mortgage above 80% loan-to-value. Instead of being conventional, the mortgage is normally considered high-ratio and requires mortgage loan insurance.
For eligible insured purchases below $1.5 million, the minimum down payment can be much lower. The current CMHC minimum equity requirements for one- or two-unit owner-occupied properties require 5% of the first $500,000 of lending value and 10% of the remainder.
Consider a $750,000 home. The minimum down payment under those insured-mortgage rules is $50,000: $25,000 on the first $500,000 and another $25,000 on the remaining $250,000. A conventional mortgage on a $750,000 purchase would instead require $150,000 down when the purchase price and lending value are the same.
The distinction between the two financing structures is covered more fully in the comparison of conventional and high-ratio mortgages.
Why Does 20% Matter?
The 20% threshold matters because mortgage loan insurance is generally required when a homebuyer makes a down payment below that level. The insurance protects the lender if the borrower cannot make the mortgage payments.
Reaching 20% generally removes that mandatory insurance requirement. CMHC’s current explanation of mortgage loan insurance and down payments identifies an LTV above 80% as requiring the insurance and states that buyers putting 20% or more down do not need CMHC insurance.
Avoiding mandatory insurance is separate from the amount of equity itself. A conventional mortgage describes an LTV of no more than 80%, while insurance status describes whether mortgage default insurance covers the lender. That distinction is important when comparing conventional and insured mortgages.
Can You Put More Than 20% Down?
A 20% down payment is the usual starting point for conventional financing, not a maximum. You can contribute 25%, 30%, 40% or more if your lender accepts the financing arrangement.
Putting more down reduces both the mortgage amount and the LTV. On a $600,000 home, for example, $180,000 down represents 30% of the purchase price and leaves a $420,000 mortgage.
The decision to contribute additional cash should still account for the money needed to complete the purchase. The down payment is separate from mortgage closing costs in Canada, so using nearly all available savings for the down payment can leave a buyer short of cash needed at closing.
What If the Home Costs $1.5 Million or More?
The 20% figure becomes especially important at this price level. CMHC mortgage loan insurance is available only when the purchase price or lending value is below $1.5 million under its homeowner programs.
For homes priced at $1.5 million or more, CMHC states that a minimum 20% down payment is required and its mortgage loan insurance is unavailable.
That does not mean every buyer who has exactly 20% down will automatically receive a mortgage. The down payment establishes the amount of equity in the purchase, while the lender still has to approve the borrower and property under its lending requirements.
Does Having 20% Down Guarantee a Conventional Mortgage?
A 20% down payment normally produces an 80% LTV when the home’s purchase price and lending value are the same. However, the conventional classification ultimately depends on the relationship between the mortgage amount and the property’s lending value.
This distinction can matter when the value accepted by the lender differs from what you agreed to pay. Simply having cash equal to 20% of the purchase price does not change the underlying requirement that the mortgage remain within the applicable LTV threshold.
For that reason, treat 20% of the purchase price as the normal conventional down-payment benchmark rather than assuming the percentage alone guarantees mortgage approval.
Questions About Conventional Mortgage Down Payments
Can you get a conventional mortgage with 10% down?
A 10% down payment normally leaves a 90% LTV mortgage when the purchase price and lending value are the same. That would be high-ratio rather than conventional and would generally require mortgage loan insurance.
Does a larger conventional down payment reduce your mortgage payment?
Putting more money down reduces the amount you need to borrow. With the same interest rate, amortization and payment frequency, a smaller mortgage principal produces a lower required mortgage payment.
Can a gifted down payment be used toward a home purchase?
CMHC recognizes a non-repayable financial gift from a relative as one of the traditional sources of down-payment funds under its Purchase program, alongside sources such as savings and proceeds from selling another property.
