According to the Canadian Department of Finance in November 2024, nearly 1 in 40 Canadians are currently saving for their first homes with a Tax Free First Home Savings Account, and plenty more are using unregistered accounts to save for their down payments. If you’re dreaming of home ownership but your account balance is looking a little short, you’re not alone!
One of the questions we hear frequently at Auxilium is: “Can I buy a home without a down payment?” The short answer is no, however that’s not to say there aren’t government programs and creative solutions to make home ownership possible with little or no money down. Let’s explore some of the alternate options to complement saving for a down payment the traditional way.
How much of a down payment do I need to purchase a home in BC?
First things first, let’s talk about how much money you actually need saved for your down payment. In Canada, the minimum down payment required for an insured purchase is as follows:
- 5% of the value up to $500,000
- 10% of the value between $500,001 to $1,500,000
When the purchase price is over $1,500,001 then an insured mortgage is not possible, and you’re required to put down a minimum of 20% of the overall value.
Unfortunately, these percentages are set by the federal government, so there isn’t a case where a lender like a bank is allowed to offer a mortgage with a lower down payment than the minimum. This means for a house priced at $500,000, federally regulated lenders and those utilizing one of the mortgage insurance agencies (CMHC, Sagen, Canada Guaranty) legally aren’t permitted to offer you a mortgage with less than $25,000 down. While we can’t lower the amount needed for your down payment, we can look at other ways to get the funds needed so you can purchase the home of your dreams.
Alternate Sources for Your Down Payment
Option 1: Gifts from Family
If you’re looking to family for help with your down payment, you’re not the only one! A 2021 study from CIBC found that 30% of Canadians have had financial assistance from family with their down payment, who gave on average $80k. We understand that not everyone is in a financial situation to receive funds from family members, but whenever possible, this is one of the most common strategies in reducing your own savings required to purchase a home. If you go this route, your mortgage lender will usually require a signed Gift letter from whomever is giving you the money confirming that the funds are not a loan and do not need to be repaid. This is so that the money isn’t factored into any calculations like the mortgage stress test or the maximum mortgage you can financially take on. The definition of “family” is fairly broad these days and has been greatly expanded, allowing more borrowers to take advantage of this option.
Option 2: Borrowing Your Down Payment with a “Flex Down” Mortgage
Depending on your credit score and debt ratios, some lenders allow you to borrow either all or part of your down payment through a line of credit or a personal loan. This is known as a “flex down” mortgage, and the repayment of this extra loan needs to be factored into your stress test and other calculations to ensure you can pay back both the standard mortgage terms and the additional funds for your down payment. If you’re considering a “flex down” mortgage, you’ll need to keep in mind any additional requirements for paying back your mortgage when using mortgage calculators and looking at homes to ensure you can prequalify for the entire amount and aren’t outside of your budget. There is an additional surcharge to the standard “mortgage insurance” premium, but well worth it if it’s the only way to secure a down payment and most importantly makes financial sense in your overall financial situation.
Option 3: Federal and Provincial Support Programs
There are several support programs available for first-time home buyers and non-first-time home buyers through the provincial and federal governments. We’ve got an extensive list of these programs, how much you can receive, and who qualifies at the following posts:
Big News for First-Time Home Buyers: 2025 Updates to GST Relief Program
First-time home buyers can now save the GST on new homes up to $1.5 million! Here’s who qualifies and how much you could save.
Government Incentives for Homeowners and Purchasers 2025
BC residents looking to purchase a home can take advantage of a number of provincial and federal incentives for homeowners in 2025.
Government Incentives First-Time Home Buyers in BC Should Know
Affordability remains one of Canadians’ top concerns with the housing market when purchasing their first home. Fortunately, a number of federal and provincial programs are available for BC residents to take advantage of in 2025.
While some of these programs give money straight back in your pocket upon the purchase of a new home, others help you on the road to saving for your down payment by offering tax-free incentives through multiple different registered savings accounts. Whether you’re looking to become a homeowner for the first time or have your eye on your next house, these programs are well worth looking into!
Option 4: Cash Back Programs
While “cash back” incentive programs provided by some lenders cannot be specifically used towards the down payment of a home, they can be used to pay off or pay down existing debts, where debt servicing ratios are the hinderance in obtaining a mortgage. The cash back varies anywhere from 1% to 5% of the mortgage amount. So let’s say your potential mortgage is going to be $500,000 and you’ve already got the down payment covered; however, you’ve got a credit card with a $15,000 balance that’s causing your debt servicing not to work. In this case you could take advantage of a 3% cash back, providing you $15,000 (3% of $500,000) and these funds which would be provided to your solicitor at closing, would be used by your solicitor to pay off your existing credit card. Now bear in mind that cash back mortgages do come with slightly higher rates, however, provided you can debt service the payment based on these rates, then these programs may be the difference between continuing to rent versus becoming a homeowner.
How do I know what the best savings solution is for me?
One of the reasons we love working with our clients is that every single person who walks through the door or inquires online is unique, with their own financial history, goals, and capabilities. No matter if you’ve got less than stellar credit, are new to Canada, or need extra assistance in finding a lender, the expert team at Auxilium Mortgage is ready to help you find the right mortgage for your needs.
If you’re looking to purchase a home with minimal upfront savings, we can help you explore all of your options, including flex down mortgages, flexible mortgage terms, alternate lenders, and more. Contact us today for a free no-obligations consultation and experience the difference working with Auxilium Mortgage can make!