How to Save for a Down Payment in Canada: Complete Guide (2026)

This page covers saving for a down payment: how much you need, what mortgage insurance costs if you put down less than 20%, the accounts that help (the FHSA, the RRSP Home Buyers’ Plan and the TFSA), and how long saving takes. The first-time buyer hub covers the rest of buying a first home, and the FHSA guide covers the account in detail.

The FHSA (First Home Savings Account) changed the math. Contributions of up to $8,000 a year ($40,000 lifetime) are deductible, so at a 30% marginal rate each full year’s contribution returns about $2,400 in tax, and growth and a qualifying withdrawal are tax-free. The table below shows five years of maximum contributions growing at an assumed 5% a year.

The minimum down payment is 5% on the first $500,000, but putting down less than 20% means paying mortgage default insurance: a one-time premium of 2.80% to 4.00% of the mortgage, usually added to the loan. On a $500,000 home with 5% down, that’s $19,000. Many buyers combine an FHSA, a TFSA and the RRSP Home Buyers’ Plan (up to $60,000 per person) to get closer to 20%, while weighing that against how prices move while they save.

How much down payment do you need?

Minimum down payment rules

The $1.5 million limit applies since December 15, 2024 (it was $1 million). Source: FCAC, Down payment.

Example calculations

Mortgage insurance premiums

First-time buyers and buyers of new builds can choose a 30-year amortization, which adds 0.20 percentage points to the premium. Example: a $500,000 home with 5% down is a $475,000 mortgage; at 4.00%, the premium is $19,000, added to the mortgage.

Accounts for down payment savings

How they compare

FHSA (First Home Savings Account)

Example: five years of maximum FHSA contributions (contributions at the start of each year, 5% annual growth assumed, 30% marginal tax rate):

After five years: $40,000 contributed, about $6,415 of growth and $12,000 in tax refunds, about $58,415 toward a down payment if the refunds are saved too. Actual growth depends on the investments; a savings account or GIC earns less than 5% at today’s rates.

RRSP Home Buyers’ Plan (HBP)

The HBP and FHSA can both be used for the same home. More in the Home Buyers’ Plan guide.

TFSA

How long saving takes by city

This table assumes saving $800 a month, with no investment growth, toward the minimum down payment on a typical home in each city: the board’s benchmark price where it publishes one, otherwise an average. Boards release their figures on different days, so the month of each price is shown beside it:

None of these prices reaches $1.5 million, so the tiered 5%/10% minimum applies to all of them. Prices come from each city’s real estate board. Montreal’s and Winnipeg’s boards publish no all-homes average, so those two are each board’s dollar volume of sales divided by its number of sales; the housing market pages have the details.

20% down (no mortgage insurance)

This is why many buyers in high-cost cities combine an FHSA, the Home Buyers’ Plan and a TFSA rather than saving 20% from income alone.

How long to save $20,000

The refund applies to FHSA contributions, which are capped at $8,000 a year, so saving more than $667 a month doesn’t raise it. Details in is an FHSA worth opening.

A couple saving together

Each partner can open an FHSA, so a couple has twice the room.

Savings strategies

How much to save each month

These leave out investment growth and tax refunds, which reduce the monthly amount.

Ways to save faster

Paying yourself first

1. Set a monthly savings target.
2. Set up an automatic transfer on payday.
3. Fill the FHSA first (about $667 a month uses the full annual room).
4. Put the rest in a TFSA.
5. Budget with what’s left.

Where to keep the money

The shorter the timeline, the less room there is for the balance to fall right before you buy.

Stocks and equity funds can drop 20% or more in a year, which matters when the purchase date is fixed.

Government programs that help

Provincial programs include British Columbia’s first-time home buyers’ property transfer tax exemption, Ontario’s land transfer tax refund and Quebec’s refundable first-time buyer tax credit on the welcome tax. The first-time home buyer programs page covers each.

Down payment sources

What lenders accept

What lenders check

An action plan

1. Work out a target price and the down payment it needs.
2. Open an FHSA if you’re a first-time buyer.
3. Set up automatic contributions.
4. Use a TFSA for savings beyond the FHSA room.
5. Claim the FHSA deduction and save the refund.
6. Consider RRSP savings for the Home Buyers’ Plan.
7. Track progress toward the goal.

House hacking: live in one unit, rent the rest

House hacking means buying a property with a rental component and using rental income to offset your mortgage.

Rents by city are in the rental market pages.

Qualification: lenders and mortgage insurers count part of the expected rent from a legal unit when calculating your debt ratios; the method varies (CMHC). For example, if a lender adds half of $1,400 a month in rent to your income, that supports about $39,000 more mortgage at a 6.99% qualifying rate and the 39% GDS limit.

Plexes (duplexes and triplexes) are especially common in Montreal and Quebec City.

Buying with a partner or friend

Buying with a friend, sibling or parent pools two incomes and two down payments.

Critical step: Hire a real estate lawyer to draft a co-ownership agreement covering: contribution percentages, who pays what, what happens when someone wants out, and how to handle disagreements.

The bottom line

For a first-time buyer, the FHSA is the only account that gives a deduction going in and a tax-free withdrawal for the home, so it usually comes first; about $667 a month uses the full annual room. A TFSA holds savings beyond that, and the Home Buyers’ Plan adds RRSP savings. Money needed within a few years is usually kept in savings accounts or GICs. At purchase, the First-Time Home Buyers’ Tax Credit and any provincial land transfer tax refund reduce the cost further.

Using a TFSA for a down payment

TFSA basics for home buyers

The Tax-Free Savings Account is Canada’s most flexible savings vehicle. For home buyers, the key advantages are:

• No restrictions on withdrawal purpose — unlike the RRSP HBP, you don’t need to be a first-time buyer.
• No withdrawal limit — take out as much as you need.
• No repayment requirement — unlike the HBP’s 15-year repayment schedule.
• Contribution room recovers: A withdrawal is added back to your TFSA contribution room on January 1 of the following year, not right away, so putting it back sooner uses other unused room.
• All growth is tax-free — no tax on interest, dividends, or capital gains inside the account.
• Withdrawals are not taxable income — they don’t affect OAS, GIS, or other income-tested benefits.

How much TFSA room you have

Room builds up from the year you turn 18 (or 2009, if later): someone who has been eligible every year since 2009 and never contributed has $109,000 of room in 2026. A withdrawal is added back to your TFSA contribution room on January 1 of the following year, not right away, so putting it back sooner uses other unused room. The year-by-year limits and how to check your own room are in how much TFSA room you have.

How TFSA withdrawals work for a down payment

The mechanics

1. Request a withdrawal from your TFSA — online, in-branch, or via your brokerage.
2. Receive the funds — deposited to your bank account within 1–5 business days (cash) or according to your investment liquidation timeline.
3. Use the funds for anything — down payment, closing costs, furniture, doesn’t matter.
4. No tax consequence — the withdrawal is not reported as income. You do not need to report it on your tax return.
5. Contribution room is restored on January 1 of the following year.

Worked example

Critical rule: Do not re-contribute in the same calendar year as the withdrawal (unless you have unused room from prior years). Re-contributing too early can create an excess contribution, taxed at 1% per month on the excess.

Investment considerations before withdrawing

Timing your liquidation

If your TFSA holds investments (not just cash), you need to plan the liquidation:

Strategy: Begin shifting to cash or HISA 6–12 months before you plan to withdraw for a down payment. This eliminates market risk — you don’t want your down payment to drop 15% because of a market correction the month before closing.

What about investment gains inside the TFSA?

All gains are permanently tax-free. If you contributed $50,000 and it grew to $85,000, you can withdraw the full $85,000 tax-free. The contribution room restored is based on the amount withdrawn, not the original contribution — so you get $85,000 in restored room, which is a bonus.

TFSA vs. FHSA vs. RRSP HBP

Feature comparison

Tax benefit comparison

Scenario: $30,000 saved for a down payment, marginal tax rate 30%.

For a first-time buyer the FHSA gives the same deduction as the RRSP with no repayment requirement.

Dollar comparison

Scenario: saving $8,000 a year for 5 years at a 5% return, contributions at the end of each year, 30% marginal tax rate.

Both accounts grow tax-free at the same rate; the difference is the FHSA deduction. The refund arrives after you file, so reinvesting it a little later than shown lowers the second figure slightly.

Using more than one account adds purchasing power; the FHSA stands out because it combines a deduction with a withdrawal that is never repaid.

When to use your TFSA for a down payment

Best use cases

When to prioritize other accounts

Optimized withdrawal strategy for maximum funding

First-time buyer saving for two years, then buying

Repeat buyer (upgrading)

For repeat buyers, the TFSA is often the only registered account option for supplementing their down payment beyond sale proceeds.

Common mistakes to avoid

Paying off debt or saving first

Paying off debt vs saving for a house

This is one of the most common financial dilemmas for aspiring homeowners in Canada. The right answer isn’t always “pay off debt first” — it depends on the type of debt, the interest rate, and the cost of waiting.

The core trade-off

The financial math often favours a hybrid approach — paying down the most expensive debt aggressively while saving for a down payment simultaneously.

The interest rate comparison method

The simplest framework: compare the interest rate on your debt to the return on your savings and the cost of delaying homeownership.

Decision matrix by debt interest rate

Why the math favours saving over low-rate debt

If you have a $15,000 student loan at 5.25% interest and you’re saving in a FHSA:

• Cost of carrying the loan for 1 year: ~$788 in interest.
• Benefit of contributing $8,000 to FHSA: $8,000 × 30% marginal rate = $2,400 tax refund + investment growth.
• Net benefit of saving instead of extra loan payments: $1,612+ per year.

Meanwhile, if home prices in your target market rise 4% on a $500,000 home, that’s $20,000 in additional cost for each year you delay.

Worked examples

Example 1: High-interest debt — pay off first

Maya — $12,000 in credit card debt at 21%

On the surface, Option A leaves more cash, but the $7,600 still on the card adds a payment of about $228 a month (3% of the balance) that lenders count; if her total debt ratio is the limit, that cuts the mortgage she qualifies for by about $32,600 at a 6.99% qualifying rate. A cleaner credit record may also help her rate.

In this example: paying off the card first leaves Maya less cash but no debt payment counting against her mortgage approval.

Example 2: Low-interest debt — save simultaneously

Jordan — $25,000 student loan at 5.25%, $1,500/month to allocate

Jordan’s student loan payment was already factored into the TDS ratio at the regular payment amount — paying it off faster doesn’t dramatically change mortgage approval timing. The hybrid approach builds the down payment faster.

In this example: saving while making regular loan payments plus a small extra amount builds the down payment faster.

Example 3: Mixed debt — prioritize strategically

Anika — $8,000 credit card (21%), $15,000 car loan (6%), $2,000/month to allocate

By not speeding up the 6% car loan, and putting the extra cash on the 21% card and then into savings, Anika has about $28,800 toward a down payment after two years while the car loan runs to term.

What waiting costs if prices rise

Waiting to become debt-free has a cost if home prices rise in the meantime:

If paying off all debt takes 2 extra years and prices rise 4% a year, the same home costs $40,800 more; compare that with the interest you’d save by clearing the debt first. Prices can also stay flat or fall, which makes waiting cheaper, so the table shows a range rather than a forecast.

The TDS impact: how much does your debt actually reduce your mortgage?

When your total debt service ratio is the limit; 25-year amortization, semi-annual compounding.

If eliminating $300 a month of debt payments lets you qualify for $40,000 to $50,000 more mortgage, that could be the difference between affording a 2-bedroom and a 3-bedroom — or between buying and not buying.

Strategies for doing both at once

1. The priority waterfall

One common order for spare cash:

1. Emergency fund: a starter cushion before anything else.
2. Employer RRSP match: matched contributions are an immediate return (100% on a dollar-for-dollar match).
3. High-interest debt (above 10%) — aggressively pay down.
4. FHSA contributions (up to $8,000 a year): the deduction is worth your marginal tax rate.
5. Medium-interest debt (5–10%) — accelerate payments.
6. Additional down payment savings (TFSA, RRSP HBP) — build beyond minimum.
7. Low-interest debt (below 5%) — minimum payments only.

2. Use tax refunds strategically

When you contribute to an FHSA or RRSP, use the tax refund to pay down debt:

This creates a virtuous cycle: savings generate refunds, refunds eliminate debt, less debt improves your mortgage approval.

3. Automate the split

Set up automatic transfers on payday:

• Savings (FHSA or HISA): Transfer X% of net income automatically.
• Extra debt payment: Transfer Y% automatically on the same schedule.
• Don’t rely on what’s left over — automate both priorities.

4. Side income acceleration

Direct any variable income (bonuses, tax refunds, side hustle income) entirely toward whichever priority has the highest current impact:

• If you’re above 10% debt interest: side income → debt.
• If debt is manageable: side income → savings to reach the down payment target faster.

Minimum down payment targets

Above $500,000: 5% on the first $500,000 + 10% on the remainder. *$800K: $25,000 + $30,000 = $55,000.

A buffer above these amounts helps with costs that come up at closing.

Common mistakes

Borrowed or gifted down payments

Saving a down payment is the biggest hurdle for most Canadian home buyers. When savings fall short, borrowing for a down payment may seem like an obvious solution. But the rules around borrowed down payments can significantly affect — or even derail — your mortgage approval.

Here’s what you need to know.

Can you legally borrow for a down payment?

Yes, there is no law preventing you from borrowing for a down payment. However:

1. You must disclose it — Failing to disclose borrowed funds is mortgage fraud
2. The loan payments count as debt — They increase your TDS ratio and reduce your qualifying amount
3. Lenders verify the source — They check your bank statements for the origin of your down payment funds

How borrowed down payments affect qualification

When you borrow for your down payment, the lender adds the loan payments to your debt obligations:

Example: for an insured mortgage, CMHC has lenders count at least 3% of an unsecured line of credit’s balance as a monthly payment (CMHC), and many lenders use the same figure. If your total debt service ratio is the limit, each dollar of that payment is a dollar less mortgage payment you qualify for; the last column is the mortgage those payments would carry at a 6.99% qualifying rate over 25 years (semi-annual compounding). Your own figure depends on your qualifying rate and whether the TDS ratio is what limits you.

The catch: if you are already near the debt ratio limit, the payments on a borrowed down payment can cut the mortgage you qualify for by far more than the amount you borrowed.

Down payment sources ranked

Best sources (no impact on debt ratios)

Acceptable but risky sources (affects debt ratios)

Not acceptable

The FHSA + HBP strategy

Registered accounts let you use your own savings without taking on a loan payment:

A couple could use up to $200,000, plus FHSA growth, from these accounts without a loan payment counting against their debt ratios.

→ FHSA Calculator → Home Buyers’ Plan Calculator

Borrowed down payments and insured mortgages

For an insured mortgage, CMHC accepts a borrowed down payment only in limited cases: its Purchase program allows non-traditional sources such as unsecured personal loans or lines of credit on 1- or 2-unit homes with a loan-to-value of 90.01% to 95%, for borrowers with a strong credit history (CMHC). Other insurers and lenders set their own rules.

Gift down payments

Gifted funds are one of the most common down payment sources and have no negative impact on your mortgage qualification.

Requirements for a gift letter

The donor must provide a signed letter stating:

Some lenders also require:

• Proof the donor has the funds (bank statement)
• Confirmation the funds have been transferred to the buyer’s account

Who can gift?

When borrowing makes sense

Despite the drawbacks, there are limited situations where borrowing can work:

1. Bridging a small gap to 20%

If you are just short of 20% down, borrowing the difference can avoid the mortgage default insurance premium, provided the lender accepts borrowed funds for an uninsured mortgage and the loan payment still fits your debt ratios.

Example:

The premium avoided is far larger than a year’s interest on the small loan, but only if a lender approves an uninsured mortgage with part of the down payment borrowed.

2. Using a secured line of credit at low rates

If you have a HELOC at a low rate and the payments don’t push your TDS over 44%, borrowing from your existing home equity can work.

3. Short-term bridge financing

If you’re selling a property and closing dates don’t align, a bridge loan covers the gap temporarily. Lenders treat this differently from a permanent loan.

What NOT to do

Alternative strategies

If you can’t reach your down payment goal:

→ Down Payment Calculator

Related resources

• Am I ready to buy a house?
• Deposit vs down payment
• FHSA Guide
• Best FHSA Accounts
• First-Time Home Buyer Ontario
• Mortgage Affordability Calculator
• RRSP Home Buyers Plan
• Best HISA Rates
• Mortgage Affordability by Generation
• Average Savings by Age Canada
• Mortgage stress test
• Buying a home with student debt
• First-time home buyer mistakes to avoid
• British Columbia Property Transfer Tax Calculator
• Closing on a Home in Canada