How to Save a Down Payment for a House
Saving up a down payment is one of the biggest challenges facing Canadian home buyers.
The process can feel less daunting if you break it down into separate tasks, such as:
Knowing approximately when you want to buy, so you know how long you have to save.
Deciding where the money will come from.
Storing your down payment in an account that will help speed its growth.
That sounds doable, right? Let's see how each of these steps work.
Looking for down payment assistance?
Government programs can augment savings for first-time home buyers.
Make a down payment savings timeline
Because of high monthly and daily expenses, saving a down payment isn’t a quick process for most Canadian home buyers. Plotting out how long it might take can help determine how aggressive your saving strategy needs to be.
For example, if you can manage to save $500 a month — which is a major accomplishment — it will take you 60 months, or five years, to reach a savings goal of $30,000. That would be enough for a minimum down payment on a home worth $550,000.
If that timeline doesn't work for you, or your sights are set on buying a more expensive home, you'll have to make a concerted effort at growing your down payment more quickly.
Decide where your down payment savings will come from
Whether you want to buy in the next two years or are saving for a purchase far in the future, there are a few strategies that can help you save a down payment more quickly.
Cut expenses
If buying a home is your top priority, see if there are any costs you can reduce, such as entertainment, dining out, travel, etc. Every dollar you save on nonessentials can be put towards your home down payment.
More drastic measures could include selling your car, living with a roommate, or moving back home with your parents, if possible. These major life changes could significantly lower your monthly expenses.
Use the Home Buyers’ Plan
The Home Buyers’ Plan (HBP) allows you to borrow up to $60,000 from your registered retirement savings plan (RRSP) tax-free. You need to repay the funds to your RRSP within 15 years.
Of course, you must contribute to your RRSP in order to borrow from it. So if you think you’ll want to use the HBP to help you make your down payment, start paying into your RRSP as early as possible. Each year, you can contribute up to either 18% of the income you earned in the previous year or a set amount (for 2026, it’s $33,810).
Store savings in the right type of account
Saving up tens of thousands of dollars is hard work; storing those funds in an account that earns interest or generates more significant returns is a way to accelerate the process. Consider making automatic bi-weekly or monthly transfers into one of the following accounts:
High-interest savings account (HISA). HISAs, particularly those offered by online banks, usually offer better interest rates than standard savings accounts.
First Home Savings Account (FHSA). An FHSA can be used as a savings account, an investment account or both. Deposits are tax-deductible, and earnings are tax-free.
Tax-free savings account (TFSA). A TFSA is another account you can use to grow your down payment more quickly through investing. Contributions are not tax-deductible, but earnings are tax-free.
Investing using an FHSA or TFSA could grow your down payment much faster than simply parking it in a savings account. But chasing those gains means accepting risk. You could wind up with less money than you started with.
If you plan on investing your down payment funds, understand all of your options — stocks, bonds, GICs — and decide how much risk you're willing to take on.
If you have high-interest debt, such as outstanding credit card balances, consider paying that down before trying to save in earnest. If you’re paying 20% or more in interest on a credit card, for example, you could end up spending more to service your debt than what you can save.
Know the down payment amount you need
In Canada, minimum down payment amounts depend on a home’s price:
For homes priced $500,000 or less: The minimum down payment is 5%.
For homes priced $500,001 to $1.5 million: You're required to pay 5% on the first $500,000 and 10% on the remaining amount.
For homes priced $1.5 million and above: The minimum down payment is 20%.
Many people try to save a down payment of at least 20% of the purchase price so they can avoid mortgage default insurance, which is typically required if your down payment is less than 20%.
Lenders may require you to put down more than the minimum due to your credit score, debt service ratios or the mortgage stress test, so it's never a bad idea to save more for a down payment than you think you might need.
DIVE EVEN DEEPER
Clay Jarvis
Clay Jarvis
Clay Jarvis