5% vs. 20% Down Payment in Ontario: The Real Cost Difference

Should you put 5% down and buy sooner, or save 20% and skip mortgage default insurance? On a $500,000 Ontario home, 5% down means a $25,000 down payment, a $19,000 CMHC premium added to your loan and about $480 more per month than 20% down, using sample 5-year fixed rates as of October 2026. Over a 25-year amortization, that adds up to roughly $70,000 more in total cost, even after counting the $75,000 you did not have to save up front.

That does not make 5% down a bad choice. It can get you into the market years earlier, and insured mortgages often get lower rates than uninsured ones. If this is your first home, our first-time home buyer mortgage team can show you both scenarios side by side for your price range. This guide walks through the real numbers, the rules that decide when 5% is even allowed, and the hidden costs most comparisons skip.

Why Your Down Payment Size Matters

Your down payment decides how much you borrow, whether you pay a mortgage default insurance premium and what rate you are offered. The Bank of Canada held its policy rate at 2.25% on September 2, 2026, with the next decision on October 28, 2026. Fixed mortgage rates follow bond yields more than the policy rate, so they have not dropped as much.

As of October 2026, one national lender's posted 5-year fixed rates in Ontario were 4.59% for insured mortgages (under 20% down), 4.79% for insurable mortgages with 20% to 24.99% down, and 5.09% for uninsured mortgages. Rates change often and depend on your credit, income, loan size and property, so check today's 5-year fixed mortgage rates before you decide.

A larger down payment means a smaller loan, lower monthly payments and less interest over time. A smaller down payment means a bigger loan plus an insurance premium, but it can get you into a home sooner.

Minimum Down Payment Rules: When Is 5% Down Allowed?

In Canada, you can put just 5% down only if the home costs $500,000 or less. Since December 15, 2024, insured mortgages are allowed on homes priced under $1.5 million (the old cap was $1 million). 

The minimum down payment rules set by the federal government are:

So on an $800,000 home, the minimum is $55,000 (about 6.9%), not $40,000. Any down payment under 20% needs mortgage default insurance from CMHC, Sagen or Canada Guaranty. A 20% down payment is not a legal requirement for most buyers, but it is the point where insurance is no longer required.
 

Upfront Costs: 5% vs. 20% Down on a $500,000 Home

We will use a $500,000 home, the highest price where a true 5% down payment is allowed. If your target home costs more, see the $800,000 example further down.

5% Down on a $500,000 Home

Your down payment is $25,000 (5% of $500,000), so you borrow $475,000. Because that is more than 80% of the price, you need mortgage default insurance. CMHC's premium at this loan-to-value is 4.00%, which is $19,000. Most buyers add it to the mortgage, so the loan becomes $494,000.

In Ontario, you also pay 8% provincial sales tax on the premium, which is $1,520. This tax cannot be added to the mortgage and is paid in cash at closing. Your cash needed for these items is $26,520, before other closing costs such as legal fees and land transfer tax.

H3: 20% Down on a $500,000 Home

Your down payment is $100,000 (20% of $500,000), so you borrow $400,000. There is no insurance premium and no PST on a premium. You need $73,480 more cash at closing than the 5% buyer, but you start with $100,000 of equity instead of about $6,000.
 

Long-Term Costs: Monthly Payments and Total Interest

Here is how the two loans compare over a 25-year amortization, using the sample 5-year fixed rates as of October 2026: 4.59% for the insured 5% down mortgage and 4.79% for the 20% down mortgage. To keep the comparison simple, we assume the rate stays the same for all 25 years. In real life, you will renew several times at new rates, and posted insured rates can vary with loan size, so your actual rate may differ.

5% Down: $494,000 Mortgage

You borrow $494,000 including the CMHC premium. Your monthly payment is about $2,759. Over 25 years, you pay about $333,700 in interest, and your payments total about $827,700. In the first 5-year term alone, about $105,900 of your payments goes to interest.

20% Down: $400,000 Mortgage

You borrow $400,000 with no premium. Your monthly payment is about $2,279, which is about $480 less per month. Over 25 years, you pay about $283,700 in interest, and your payments total about $683,700.

The real cost difference: the 5% buyer pays about $144,000 more in mortgage payments plus $1,520 in PST, but keeps $75,000 more cash at the start. The net difference is roughly $70,500 over 25 years in favour of 20% down, before you count what that $75,000 could have earned if invested.

What If the Home Costs More Than $500,000?

Above $500,000, you cannot put just 5% down. On an $800,000 home, the minimum is $55,000: 5% of the first $500,000 ($25,000) plus 10% of the remaining $300,000 ($30,000). Here is how that minimum compares with 20% down, using the same sample rates as of October 2026 and a 25-year amortization.

The minimum down payment saves $102,616 in cash at closing, but costs about $681 more per month. Home prices from $1.5 million and up need 20% down, because insured mortgages are not available at that price.

Other Factors That Change the Math

Payments and interest are only part of the story. These factors can make 5% down cheaper or more expensive than the example above suggests.

1. CMHC Insurance Premium and Ontario PST

With less than 20% down, your lender must insure the mortgage with CMHC, Sagen or Canada Guaranty. The premium protects the lender, not you. CMHC's current premiums, as a share of the loan amount, are:

The premium is a one-time charge that can be added to your mortgage, but the 8% Ontario PST on it must be paid in cash at closing. If you choose a 30-year amortization (open to first-time buyers and buyers of new builds on insured mortgages), CMHC adds 0.20% to the premium. Try our CMHC insurance calculator to see the premium for your price and down payment. With 20% or more down, no premium is usually required, although a lender can still ask for insurance in some cases, for example if you are self-employed or have weak credit.

2. Insured Mortgages Often Get Lower Rates

Many buyers assume 20% down earns a better rate. In Canada, it is often the reverse. Because an insured mortgage is backed by the insurer, lenders take less risk and usually price it lower. As of October 2026, the sample insured 5-year fixed rate was 4.59%, compared with 4.79% for 20% to 24.99% down and 5.09% for uninsured mortgages. Your rate still depends on your credit score, income and the property.

If you are still weighing your options, compare fixed terms with a five-year variable rate mortgage. A variable rate can suit you if you expect rates to fall and can handle payments that may change. Ask your broker to run both down payment sizes at both rate types.

3. Monthly Payment Difference

On the $500,000 example, the 5% down payment is about $2,759 per month and the 20% down payment is about $2,279, a gap of about $480 per month. On an $800,000 home, the gap grows to about $681 per month (see the table above).

That gap matters for your budget and for qualifying. Lenders look at your total housing costs, including property tax and heating, so a higher payment can lower the price you qualify for.

5% vs. 20% Down Payment: Which Should You Choose?

Here is a side-by-side comparison of 5% and 20% down for an Ontario buyer.

• 5% down payment: Good if you have a stable income, want to buy sooner and the home costs $500,000 or less. Expect a 4.00% insurance premium, PST on the premium and higher payments.
• 20% down payment: Good if you already have the savings and still keep an emergency fund. You avoid the premium, start with more equity and pay less in total, even if your rate is a little higher.
   

How to Get Closer to 20% Down

You do not have to pick only 5% or 20%. Every step up lowers the premium, and 10% down cuts it from 4.00% to 3.10%. On a $500,000 home, 10% down means a $13,950 premium instead of $19,000. These tools can help you save faster:

• First Home Savings Account (FHSA): Contribute up to $8,000 a year, to a lifetime limit of $40,000, and withdraw it tax-free for your first home.
• Home Buyers' Plan (HBP): Withdraw up to $60,000 from your RRSP for a first home, and up to $120,000 for a couple. You repay it over time.
• Gifted down payment: Many lenders accept a gift from immediate family, usually with a signed gift letter.
• Use FHSA and HBP together: The Canada Revenue Agency allows you to use both for the same home purchase.

Frequently Asked Questions
 

Can I put 5% down instead of a larger down payment?

Yes, if the home costs $500,000 or less, it is your principal residence and you qualify under the stress test. Above $500,000, the minimum rises to 5% of the first $500,000 plus 10% of the rest. From $1.5 million and up, you need 20% down.

Is it better to put 5% or 20% down?

20% down costs less in total because you avoid the premium and borrow less. 5% down can be better if waiting would mean paying more for the home later or using up your emergency savings. Compare both with your own numbers.

How much is CMHC insurance with 5% down?

The premium is 4.00% of the loan amount. On a $500,000 home with $25,000 down, that is $19,000, which is usually added to the mortgage. In Ontario, you also pay 8% PST on the premium in cash at closing, which is $1,520 in this example.

 Does 20% down get you a lower mortgage rate?

Not usually. Insured mortgages (under 20% down) often get the lowest rates because the insurer carries the default risk. As of October 2026, sample insured 5-year fixed rates were lower than uninsured rates by about half a percentage point.

Can the CMHC premium be added to my mortgage?

Yes. The premium can be added to your mortgage and paid off with your regular payments. The provincial sales tax on the premium cannot be added and must be paid at closing.
 

The Bottom Line

In today's Ontario market, 20% down costs less over the life of the mortgage, roughly $70,000 less on a $500,000 home in our example. A 5% down payment costs more, but it can get you into a home years sooner and leave cash for closing costs and emergencies. The right choice depends on your savings, your income and how long it would take you to reach 20%.

If neither option feels within reach yet, read about rent-to-own in Canada and whether it can help you build credit for a mortgage. When you are ready, LendingHub can run your numbers at 5%, 10% and 20% down so you can see the real cost before you commit.