Two separate questions get mixed together here. How much you need is a rule. Where it comes from is a choice, and the choice has real tax consequences worth getting right before the money moves.
How much you need
- Five percent of the first $500,000 of the purchase price.
- Ten percent of the portion between $500,000 and the insured price ceiling.
- Twenty percent or more removes the insurance requirement entirely.
Below twenty percent the mortgage has to be insured, and the premium is a percentage of the loan that gets added to the balance rather than paid at closing. More down means a smaller premium, and at twenty percent it disappears.
The First Home Savings Account
Contributions are deductible like an RRSP and qualifying withdrawals come out tax free like a TFSA, which makes it the strongest of the three for a first purchase. It has its own annual and lifetime contribution limits and an account lifetime, so opening one early matters even if you are not funding it heavily yet.
The RRSP Home Buyers Plan
Lets a first-time buyer withdraw from an RRSP without immediate tax, then repay it over a set schedule. It works well beside an FHSA rather than instead of it. The repayment obligation is real, and a missed repayment year gets added to your income, so plan for it.
Gifted funds
A gift from an immediate family member is accepted by essentially every lender, with a signed gift letter confirming the money is a gift and not a loan, plus evidence it landed in your account. A gift that turns out to be a loan changes your debt ratios and has to be disclosed.
Whatever the source, plan on showing ninety days of history on the account holding the funds. Move money into position early rather than the week before closing.
Sources
- Canada Revenue Agency, First Home Savings Account
- Canada Revenue Agency, Home Buyers Plan
- CMHC, mortgage loan insurance for consumers
Your next useful step
Turn what you just read into a purchase range using your income, down payment and timing.
