Read Time: 3 Minutes

Most people—even realtors—think that a 5% down payment is only for first-time homebuyers.

This is one of the biggest real estate myths in Canada.

The truth?

You don’t have to be a first-time buyer to take advantage of a 5% down payment.

There are multiple ways to qualify, whether you’re buying a new home, turning your existing one into a rental, or purchasing a second property.

Now, let’s dive in.

A 5% down payment isn’t exclusive to first-time buyers.

If you’ve owned a home before, you may still qualify for the same low-down-payment option.

So, if you’ve been told that you must put 20% down, you’ve been misinformed.

Here’s when 5% down still applies:

Buying a New Primary Residence

If you’re selling your current home and purchasing a new one, you may only need 5% down, just like a first-time buyer.

Your previous homeownership status doesn’t change that.

Keeping Your Current Home and Buying a New One

Want to turn your current home into a rental property?

You can buy your new primary residence with just 5% down, even while keeping your existing home as an investment.

Re-Entering the Market After Renting

Previously owned a home but have been renting for a while?

As long as you’re purchasing a new primary residence, you can qualify for 5% down, even if you’ve owned before.

Buying a Second Home or Cottage

Want a vacation property or a second home for work?

You can purchase a second property with just 5% down—whether it’s a cottage, getaway home, or a place to live during the workweek.

Helping Family Buy a Home

Buying a home for a child attending university or a parent who needs support?

You can purchase that home with as little as 5% down, provided they will be living there as their primary residence.

💡 Want to see how much your down payment affects your mortgage?

Use our Mortgage Payment Calculator.

Property Type Restrictions

The 5% down payment rule applies to primary residences and second homes, not rental properties.

However, you can buy a home with rental units, as long as you occupy one unit yourself.

Minimum Down Payment Rules

For homes under $500,000, you only need 5% down.

For homes between $500,000 and $1,499,999, you need 5% on the first $500,000 and 10% on the remaining amount.

For homes $1.5 million or more, you need 20% down.

CMHC Insurance Requirements

If you put less than 20% down, you’ll need mortgage default insurance through CMHC, Sagen, or Canada Guaranty.

This protects the lender and allows you to qualify with a smaller down payment.

💡 Want to learn how to maximize your down payment?

Check out How to Turn $150K Into $200K.

Keeping More Cash on Hand

Instead of putting a larger down payment on your home, you can keep more money available for investments, renovations, or emergencies.

Investment Potential

If you’re converting your current home into a rental, putting only 5% down on your new home allows you to leverage rental income while keeping more capital for other investments.

Cash Flow Considerations

Lowering your upfront costs allows you to preserve cash flow for unexpected expenses, home improvements, or market opportunities.

💡 Curious about other down payment strategies?

Read 4 Misconceptions About Down Payments.

Forgetting About Closing Costs

Your down payment isn’t the only cost.

You need to budget for closing costs, which can include land transfer taxes, legal fees, and home inspections.

Underestimating Mortgage Insurance Costs

If you’re putting less than 20% down, you’ll pay mortgage default insurance, which adds to your overall cost.

Make sure you understand how this impacts your monthly payments.

Overlooking Rental Income Potential

If you’re turning your existing home into a rental, your lender may count a portion of your rental income to help you qualify.

Not factoring this in could lead you to put down more than necessary.

💡 Still have questions?

Check out the Government of Canada’s Down Payment Rules.

Understanding the fine print and strategic opportunities can help you maximize your mortgage options and keep more money in your pocket.

You don’t have to be a first-time buyer to put 5% down.

Whether you’re moving homes, re-entering the market, buying a second home, or helping family, there are ways to qualify.

We can help you navigate your options today!

Contact us to learn how we can help you navigate the mortgage process with confidence.