Pros and Cons of Putting Less Than 20% Down for a Home in Canada

If you’ve been researching how much you need to buy a home, you’ve probably seen this number thrown around a lot: 20%. In Canada, that’s the magic figure that lets you avoid CMHC mortgage insurance. It’s often seen as the “ideal” down payment — but does that mean it’s always the right choice?

As a mortgage broker here in Guelph, I talk to a lot of first-time buyers and growing families, and one thing is clear: putting less than 20% down is not only common — it’s often the smarter move.

Let’s take a look at the pros and cons of going below 20% and what that decision really means for your mortgage, monthly payments, and timeline.

✅ PRO: You Can Get Into the Market Sooner

Let’s face it — real estate prices aren’t exactly slowing down, especially here in Guelph and Southern Ontario. If you’re aiming for 20%, you could be chasing a moving target. That $600,000 home you’re eyeing today might cost $640,000 by the time you save up another $10K.

Putting down 5% or 10% means you can stop renting and start building equity sooner, even if your down payment isn’t perfect. That can make a huge difference long-term — especially in a rising market.

❌ CON: You’ll Pay Mortgage Insurance

If your down payment is under 20%, your mortgage will be insured by the Canada Mortgage and Housing Corporation (CMHC) — or one of its alternatives like Sagen or Canada Guaranty. This protects the lender in case you default, but the cost is passed on to you.

The insurance premium is calculated as a percentage of your loan and is added to the mortgage itself (not paid upfront). For example:

• 5% down: Insurance = 4% of loan amount

• 10% down: Insurance = 3.1% of loan amount

Over the life of the loan, this can add up. But here’s the thing — if the market continues to rise, the equity you gain by buying earlier can often outpace the added cost of insurance.

✅ PRO: You Keep More Cash on Hand

One of the most overlooked benefits of putting less down? Liquidity.

Maybe you’ve got $100K saved — you could put 20% down on a $500,000 home. But should you?

I always talk this through with my clients: Do you want to be house rich and cash poor? What if:

• You need to furnish the new place?

• A surprise repair pops up?

• You want a budget for renovations or landscaping?

Sometimes, putting down 10% and keeping the other 10% in your pocket gives you the breathing room you need — not just for emergencies, but for peace of mind.

❌ CON: Higher Monthly Payments

It’s simple math — a smaller down payment = a bigger loan. Add CMHC premiums on top, and your monthly payments will be higher compared to someone putting 20% down.

But this isn’t necessarily a dealbreaker. If your income supports it, and you’ve got room in your budget, it might be a fair trade-off for getting into the market faster or keeping your cash accessible.

That’s why I always run a few side-by-side scenarios for my clients. It’s one thing to read about mortgage math — it’s another to see the numbers in front of you, tailored to your situation.

✅ PRO: First-Time Buyer Programs Can Help

If you’re putting less than 20% down — especially less than 10% — you may qualify for certain government incentives that only apply to insured mortgages. For example:

• The First-Time Home Buyer Incentive, where the government chips in 5–10% of your purchase price (as a shared equity loan).

• The ability to withdraw up to $35,000 from your RRSP under the Home Buyers’ Plan — and up to $70,000 as a couple.

These programs are designed to support buyers without large down payments. In fact, some are only accessible to those under the 20% threshold.

❌ CON: More Risk If the Market Dips

This one’s important. The less you put down, the less equity you own in your home at the start. If property values drop, you could owe more than the home is worth — what we call being “underwater.”

It’s not common in Canada, but it can happen, especially if you're forced to sell in a down market.

Still, if you're planning to live in your home for the long term and you're confident in your financial stability, this risk becomes much less of a concern.

So… Is It Better to Put 20% Down?

Here’s the honest truth: it depends.

Sometimes, yes — if you’ve got the savings, stable income, and don’t want to pay insurance, 20% makes sense. It gets you a smaller loan, lower monthly payments, and faster equity building.

But for many buyers, putting less down is the better financial strategy. It lets them enter the market sooner, stay flexible with their cash, and take advantage of programs designed to support lower down payments.

Where Does the Down Payment Fit in the Homebuying Process?

This is a key question that often gets overlooked.

Your full down payment isn’t actually due until closing day — that’s when the mortgage funds are released and you officially become a homeowner.

Before that, you’ll typically pay an initial deposit (often $5,000–$10,000 in Guelph) when your offer is accepted. That deposit goes toward your total down payment, but the full amount comes later — giving you more time to pull it together.

This is why it’s so important to talk to a mortgage broker early in the process, even if your savings aren’t quite there yet. I’ll help you figure out what’s realistic, how to structure it, and what your true range is based on your finances and goals.

Final Thoughts (From a Broker Who’s Seen It All)

There’s no one-size-fits-all when it comes to down payments. The right move for you depends on your comfort with risk, your cash flow, your timeline, and your long-term goals.

Whether you're putting down 5% or 50%, the most important thing is that you make an informed decision — one that balances the numbers with your lifestyle.

If you’re not sure which route makes the most sense, or if you just want to run the numbers and talk it through, I’m here for that.

Let’s map out your options — so when the right home comes along, you're ready to move with confidence.

David Pipe is an experienced mortgage broker serving Guelph and the surrounding area. He specializes in helping first-time buyers and growing families navigate the complex world of mortgage options, pre-approvals, and financing strategies with clarity and care.