A £25,000 deposit can buy a very different first home depending on the purchase price, the lender and your wider finances. For Canadian buyers, the minimum deposit for first home purchases is often lower than expected – but putting down the minimum is only one part of being ready to buy.

In Canada, this amount is normally called a down payment. It is the portion of the price you pay yourself, rather than borrowing through a mortgage. Knowing the minimum helps you set a realistic savings target, but it should not be the only number in your plan. Closing costs, monthly affordability and mortgage insurance can all affect the home that makes sense for you.

What is the minimum deposit for a first home?

For an owner-occupied home in Canada, the minimum down payment is based on the purchase price:

  • For a home priced at £500,000 or less, the minimum is 5%.
  • For a home priced from £500,000 to £1.5 million, you need 5% on the first £500,000 and 10% on the portion above that.
  • For a home priced above £1.5 million, a minimum 20% down payment is required.

The figures are in Canadian dollars, even if you are more used to thinking of a deposit in British terms. A £500,000 home, for example, requires a minimum down payment of £25,000. On a £750,000 purchase, the minimum would be £50,000: 5% of the first £500,000 (£25,000), plus 10% of the remaining £250,000 (£25,000).

These rules generally apply when the property will be your primary residence. A rental property, a second home or a purchase with unusual circumstances can be assessed differently. The lender will also need to confirm that your income, credit and debts support the mortgage amount.

A smaller deposit means mortgage insurance

If your down payment is less than 20%, you will usually need mortgage default insurance. It protects the lender if the borrower cannot repay the mortgage. It does not protect you from missed payments, so it is worth understanding before you make an offer.

The insurance premium is calculated as a percentage of the mortgage and usually increases when your down payment is smaller. In many cases, the premium is added to the mortgage rather than paid in cash on completion. That keeps your upfront cost lower, but means you will pay interest on the premium over the mortgage term.

A 5% down payment can therefore get you into the market sooner, which may be right for some buyers. The trade-off is a larger loan, insurance costs and potentially less room in your monthly budget. Waiting until you have 20% can avoid mortgage insurance, but it may take longer to save while house prices or rents change. There is no automatic right answer – it depends on your income, savings rate, the property and how comfortable you are with the monthly payment.

The deposit is not your full cash requirement

One of the most frustrating first-buyer surprises is learning that a deposit is not the same as the cash needed to complete a purchase. You should keep money aside for closing costs instead of putting every available pound into the down payment.

As a practical rule, many buyers budget roughly 1.5% to 4% of the purchase price for closing costs, depending on the property and location. In Ontario, these can include land transfer tax, legal fees and disbursements, title insurance, a home inspection, an appraisal where required, moving costs and adjustments for property tax or utilities.

First-time buyers may qualify for a provincial land transfer tax rebate in Ontario. If you are buying in Toronto, there is also a municipal land transfer tax, although a separate first-time buyer rebate may apply. These rebates can make a meaningful difference, but they do not cover every cost. Your solicitor and mortgage broker can help you estimate the numbers before you remove conditions or set a completion date.

You may also need a deposit when your offer is accepted. This is not an additional charge on top of your down payment. It is generally paid into trust and forms part of the money you are contributing towards the purchase. The wording can be confusing, which is why it helps to review the offer carefully with your real estate professional.

How much should you aim to save?

The minimum is a starting point, not always the best target. A sensible amount to save is enough for your required down payment, closing costs and an emergency buffer after you move in.

New homeowners quickly find costs that did not exist while renting: a boiler repair, a roof issue, a higher utility bill, furniture, garden equipment or a condominium special assessment. Emptying your savings account to reach a 20% down payment can leave you exposed. On the other hand, a slightly larger down payment may lower your mortgage payment and improve your comfort level each month.

Start with a purchase price that fits your income rather than working backwards from the biggest mortgage you might qualify for. Then compare a few down payment options – for example, 5%, 10%, 15% and 20%. Look at the payment, insurance premium, closing costs and the savings you would have left. This is often more useful than focusing on one headline interest rate.

Where can a first-home deposit come from?

Your down payment can come from personal savings, investments, a gift from an immediate family member or certain registered plans. Lenders will want a clear record of where the funds came from. Keep bank statements, investment redemption records and any gift documentation well before you apply.

For eligible first-time buyers, the First Home Savings Account can be a useful way to save with tax advantages. The Home Buyers’ Plan may also allow you to withdraw funds from an RRSP to buy or build a qualifying home, subject to the plan rules and repayment requirements. These programmes can help, but they should be used as part of a wider plan rather than a last-minute scramble for funds.

A family gift is common in the Greater Toronto and Hamilton Area, where saving for a first home can take time. It must normally be a genuine gift, not an undisclosed loan that creates another monthly obligation. Be upfront about it from the beginning. Trying to hide borrowed funds can delay an approval or put the purchase at risk.

Your approval depends on more than your deposit

A buyer with 20% down is not automatically approved, and a buyer with 5% down is not automatically declined. Lenders assess your employment income, credit history, existing debts, the property itself and whether you can handle payments at the required qualifying rate.

Before house hunting, review your credit report, avoid taking on new car finance or large credit balances, and keep your paperwork organised. Employees should have recent payslips and employment confirmation available. Self-employed buyers may need tax returns, notices of assessment and business financial information. The clearer the file, the fewer last-minute questions there tend to be.

A pre-approval can give you a useful borrowing range, but it is not a blank cheque. The final approval still depends on the home you choose, the appraisal and verification of your finances. Build a little breathing room into your budget so that a rate change, condominium fee or property-tax adjustment does not turn a comfortable purchase into a stressful one.

Get clear before you make an offer

The right first-home deposit is the one that helps you buy without leaving your finances stretched thin. If you are weighing up a 5% deposit against waiting for 20%, a mortgage broker can show you the real numbers for each route and explain what lenders will look for.

Peter at EasyApproval.ca can help first-time buyers turn an uncertain savings target into a clear mortgage plan. No muss, no fuss – just practical guidance on what you need, what you can afford and how to move forward with confidence.