Almost every buyer we meet in Surrey has heard that you need five per cent down. That is true only up to a point — literally. Canada uses a tiered minimum, and once a purchase price crosses $500,000 the requirement starts climbing.
The three tiers
- 5% on the portion of the price up to $500,000
- 10% on the portion between $500,000 and $1,500,000
- 20% on homes priced at $1,500,000 or more — mortgage default insurance is not available above that threshold
Because the tiers stack, the effective percentage rises gradually rather than jumping:
| Purchase price | Minimum down payment | Effective % |
|---|---|---|
| $500,000 | $25,000 | 5.00% |
| $700,000 | $45,000 | 6.43% |
| $850,000 | $60,000 | 7.06% |
| $1,200,000 | $95,000 | 7.92% |
| $1,500,000 | $300,000 | 20.00% |
On an $850,000 home — not unusual in Surrey — the minimum is $60,000, not the $42,500 that a flat five per cent would suggest.
What mortgage insurance costs
Put down less than twenty per cent and your mortgage must be insured. The premium is a percentage of the loan, and it climbs as your loan-to-value ratio rises:
| Loan-to-value | Premium |
|---|---|
| Up to 80% (20% down or more) | None |
| 80.01% – 85% | 2.80% |
| 85.01% – 90% | 3.10% |
| 90.01% – 95% | 4.00% |
Here is the same $850,000 home at four different down payments:
| Down payment | Loan-to-value | Insurance premium | Total mortgage |
|---|---|---|---|
| $60,000 | 92.9% | $31,600 | $821,600 |
| $85,000 | 90.0% | $23,715 | $788,715 |
| $127,500 | 85.0% | $20,230 | $742,730 |
| $170,000 | 80.0% | $0 | $680,000 |
The premium is added to your mortgage and paid off over the amortisation. The provincial sales tax on that premium, however, is due at closing and cannot be financed — budget for it separately.
Two consequences people miss
An insured mortgage caps your amortisation
Insured mortgages are limited to a 25-year amortisation, which raises the monthly payment relative to a longer schedule. Crossing the twenty per cent threshold can therefore change both your premium and your payment structure.
The gap between 19% and 20% is expensive
Look at the table again. Moving from $127,500 down to $170,000 — a difference of $42,500 — removes a $20,230 premium and lifts the amortisation cap. If you are close to twenty per cent, closing that gap is often the highest-return use of the money.
Where the down payment can come from
- Savings and non-registered investments
- An RRSP withdrawal under the Home Buyers' Plan, if you qualify
- A gift from an immediate family member, supported by a signed gift letter
- Proceeds from the sale of an existing property
Lenders will want to see the money seasoned in your account, typically for 90 days. Plan for that timeline rather than moving funds at the last minute.
Figures in this article are illustrative and calculated using Canadian semi-annual compounding. Rates shown are examples, not offers. Government programme thresholds and insurance premiums are revised periodically — confirm current numbers before making a decision.
Not sure which tier your budget lands in? Run the numbers with our mortgage payment calculator.
Written by Site Administrator
