Down Payment Options

Depending on the property the down payment varies. Here is some insight on a general rule of thumb:

• First Time Homebuyer – 5% down payment
• Secondary Property/Cottage – 5% down for ones that are liveable and accessible year round. Send me the listing to confirm if it’s not the ones mentioned as we still might be able to get minimal down payment.
• If you own a home and want to buy another home – 5% down
• Rental unit – 20% down if you do not live in it. If you live in it 5% down for a duplex and triplex. Anything else 10-20% depending on the property.
• Buying a home for family – 5% down payment.

When buying a home in Canada, anything under 20% down requires mortgage default insurance.

But here’s the part many buyers don’t realize 

✔️ The insurance premium is usually added to the mortgage
✔️ That means you don’t pay it out of pocket
✔️ It’s simply built into the total mortgage amount

So while the mortgage is slightly larger, there’s no big upfront payment required for the insurance.

What Happens Later?

If you refinance your mortgage in the future (once you have enough equity), the insurance premium does not apply again.

At that point, the mortgage is treated like a conventional mortgage.

When in doubt, reach out!

Down Payment Options

1. Minimum Required Down Payment (Rule of Thumb)

Before we talk sources of funds, here’s what the rules say about how much you need to put down:
• 5% of the purchase price if the home costs $500,000 or less
• 5% on the first $500,000 + 10% on the amount above $500,000 if the home is between $500,000 and $1.5M
• 20% minimum if the home is $1.5M or more
These are federal mortgage rules — so they apply in PEI and all of Canada.

2. Down Payment Assistance Program

Prince Edward Island’s Down Payment Assistance Program (DPAP)
• A condition-free, interest-free loan up to 5% of the home’s price (max about $17,500) to help with your down payment.
• You’ll still take out your mortgage — this is extra help to get to that minimum.
• Designed for modest-income first-time buyers under certain income and price caps.

Think of this as a booster loan helping you reach the required down payment rather than your own cash stash.

Here is more information on this: 

3. RRSP Home Buyers’ Plan (HBP)

A federal program that lets you withdraw up to $60,000 from your Registered Retirement Savings Plan (RRSP) to use toward a down payment — without immediate tax penalties.
• You must repay it back over 15 years, or the withdrawal starts to count as income.
• Couples can typically each use the plan (so up to $120,000 combined).

This is often the biggest source people tap when they haven’t saved enough cash but have accumulated RRSP savings.

4. First Home Savings Account (FHSA)

A newer federal savings account specifically for first-time buyers:
• You can save up to $40,000 tax-free, and withdrawals for a qualifying home are tax-free too.
• It’s like a hybrid of an RRSP and tax-free savings — ideal for building down payment capital in advance.

You can use both FHSA and HBP together for a purchase if you qualify.

5. Gifts From Family or Friends

Most lenders in Canada allow a gifted down payment, often from parents or immediate family — but it needs to be properly documented as a gift, not a loan.

This is a huge help for many buyers, especially when savings alone fall short.

6. Savings / Investments / Cash in TFSA or Other Accounts

The traditional route:
• Savings account funds
• Investments (stocks, bonds, mutual funds)
• TFSA (Tax-Free Savings Account) money because withdrawals are tax-free
These are still the simplest and most common sources of funds.

7. Sale of Other Property

If you own another property, you can use the net proceeds from selling it toward a down payment on your new home — that’s totally acceptable.

8. Gifted Equity

A family member sells a home below market value, and the difference becomes the buyer’s down payment.

No cash required for that portion.
The “gift” is built into the price.

For example:

Home market value: $400,000
Parent sells to child for: $350,000

That $50,000 difference = gifted equity

The lender treats that $50,000 as the down payment (if properly documented).

It’s like the house quietly whispering, “I’ve got you.”

9. What Is a Flex Down Payment?

A flex down payment means you’re borrowing your down payment instead of saving it.

Instead of: • 5% from your savings

You use: • A line of credit
• Credit card
• Personal loan
• Borrowed funds from another source

And then you qualify for the mortgage with that borrowed money included in your debt ratios.

It’s allowed by some lenders. Not all.

Quick Recap