What are the rules for mortgages in Canada? Key terms to know

By FastBuySale Newsroom · 5 Nov 2026 · 15m ago

Rule 1: the minimum down payment

Mortgages in Canada follow a set of federal rules that shape how much you need to put down, whether you must buy insurance, and how much a bank will lend you. The short answer: you need a minimum down payment that starts at 5% of the purchase price, you'll typically need mortgage loan insurance if you put down less than 20%, and federally regulated lenders must check that you could afford payments at a higher qualifying rate under the mortgage stress test.

The Financial Consumer Agency of Canada (FCAC) explains these rules for consumers, while the Office of the Superintendent of Financial Institutions (OSFI) sets the minimum qualifying rate that federally regulated lenders use for uninsured mortgages.

The FCAC says your minimum down payment depends on the purchase price. For a home of $500,000 or less, it is 5% of the purchase price. For a home between $500,000 and $1.5 million, it is 5% of the first $500,000 plus 10% of the portion above $500,000. For a home of $1.5 million or more, it is 20% of the purchase price.

The FCAC gives two worked examples. On a $400,000 home, 5% gives a minimum down payment of $20,000. On a $600,000 home, 5% of the first $500,000 is $25,000 and 10% of the remaining $100,000 is $10,000, for a total of $35,000.

Lenders may ask for a larger down payment if you're self-employed or have a poor credit history. Normally, the minimum down payment must come from your own funds, which is why the FCAC recommends saving for it and minimizing your debts first.

A bigger down payment means a smaller mortgage and less interest. In the FCAC's example of a $400,000 home at 4% over 25 years, the total cost falls from $643,649 with 5% down to $584,979 with 20% down. Run your own numbers with our

Readers evaluating Mortgages in Canada should separate marketing claims from the actual rule text that governs their account or product. When two summaries disagree, the governing document or statute wins. If a rule depends on your age, filing status, or income band, re-check it when any of those facts change. Life events quietly move people across thresholds they last reviewed years earlier.

Educational explainers like this one cannot replace personalized advice for complex situations such as divorce orders, inherited accounts, or cross-border tax residency. Escalate those cases to a qualified professional. When in doubt about a number that changes every year, describe your plan qualitatively first, then look up the current official figure for the tax year you care about before you act.

Rule 2: mortgage loan insurance

If your down payment is less than 20% of the price of your home, you'll typically need mortgage loan insurance, also called mortgage default insurance. The FCAC stresses that it protects the lender if you can't make your payments; it doesn't protect you.

Premiums range from 0.6% to 4.5% of the amount of your mortgage, and the bigger your down payment, the lower the premium. Insurance is provided by Canada Mortgage and Housing Corporation (CMHC), Sagen and Canada Guaranty, and your lender arranges it on your behalf.

You can pay the premium as a lump sum or add it to your mortgage. If you add it, you pay interest on it at your mortgage rate. Ontario, Manitoba and Quebec apply provincial sales tax to the premium, and that tax can't be added to the mortgage; you pay it when you get the mortgage.

In the FCAC example, a $380,000 mortgage with 5% down carries a $15,200 premium, while a $360,000 mortgage with 10% down carries an $11,160 premium. That's a strong reason to compare how much extra saving would lower your costs.

A useful habit is to write down your goal, time horizon, and cash buffer before you change any election related to Mortgages in Canada. Decisions made during a stressful week are the ones people reverse later at a cost. Educational explainers like this one cannot replace personalized advice for complex situations such as divorce orders, inherited accounts, or cross-border tax residency. Escalate those cases to a qualified professional.

Rule 3: the mortgage stress test

To qualify for a mortgage at a bank, you need to pass a stress test, proving you can afford payments at a qualifying rate that is typically higher than your actual contract rate. The FCAC says banks must use the higher of 5.25% or the rate you negotiate plus 2%.

OSFI describes the same rule for uninsured mortgages as the minimum qualifying rate, made up of a 2% buffer and a 5.25% floor. The FCAC adds that you need to pass the stress test even if you don't need mortgage loan insurance, while credit unions and other lenders that are not federally regulated don't have to use it.

In practice, the stress test limits how much you can borrow. If your negotiated rate is 4.5%, for example, you'd be assessed at 6.5%, because that is higher than 5.25%. The FCAC's Mortgage Qualifier Tool lets you enter the qualifying rate to estimate what you might be approved for.

Our can help you compare offers, and the shows how rising living costs affect your budget over the life of a mortgage.

Keep digital and paper copies of confirmations after every change. Screenshots of election pages, email receipts, and year-end statements make tax season and job changes far less chaotic. Compare fees the same way you would compare two similar listings before you buy: look at what you pay each year, what you get, and whether a simpler option meets the same need.

Rule 4: amortization and the key terms to know

Amortization is the length of time it takes to pay off the whole mortgage. The FCAC says that if your down payment is less than 20%, your maximum amortization is 30 years if you're a first-time buyer and/or purchasing a new build, and 25 years in all other cases. With 20% or more down, your lender sets the maximum. A longer amortization lowers each payment but increases total interest.

Term is the length of your current mortgage contract, which must be renewed. The FCAC's tool notes terms are generally 1 to 10 years, while the most common amortization period is 25 years. At each renewal your rate can change.

Other key terms: a fixed rate stays the same for the term, while a variable rate moves with the lender's prime rate. An open mortgage lets you prepay freely, while a closed mortgage limits prepayments and may charge a prepayment penalty. A high-ratio loan is one above 80% of the property value, which is where insurance comes in.

Next steps: work out your minimum down payment, get pre-approved, compare at least a few lenders, and read the prepayment terms before signing. More guides are at and

Found this Mortgages in Canada explainer useful? Share it with a friend, tell us what we missed in the comments, and get the FastBuySale app on Google Play () for more guides. Have something to sell? Post a free listing at in a couple of minutes.

If a rule depends on your age, filing status, or income band, re-check it when any of those facts change. Life events quietly move people across thresholds they last reviewed years earlier. Automation helps. Calendar reminders for annual reviews, automatic transfers, and beneficiary checkups reduce the chance that a good plan dies from neglect.

💬 Join the discussion on this article →

More in Finance · Trending News · Browse local deals