5% vs 20% Down Payment: A First-Time Buyer Case Study
This is a question we walk first-time buyers through almost every week. The buyer below is a composite, built from real conversations we have across Toronto, Peel, and Durham, but the numbers are real and current for 2026.
Meet our buyer. A first-time buyer (let us call her Amara) is approved and ready to move on a $750,000 townhome. Her parents have offered to help her reach a 20% down payment if she waits roughly two more years to save. So she has a real choice: buy now with the minimum down, or wait and put 20% down later. Both are valid. They just buy you different things.
The two scenarios, side by side
Same home, same buyer, same illustrative rate (3.79%, 30-year amortization). The only thing that changes is the size of the down payment.
5% Down
20% Down
A quick note on how the minimum actually works
In Canada the minimum down payment is not a flat 5% once you cross $500,000. On a $750,000 home the rule is 5% on the first $500,000 ($25,000) plus 10% on the portion above $500,000 ($25,000), so the true minimum is $50,000, not $37,500. That catches a lot of first-time buyers off guard, so it is worth knowing before you start shopping.
Buying now with 5%: the honest pros and cons
What you gain
- You are in the market roughly two years sooner, owning instead of renting.
- You start paying down principal and building equity now, on the full $750,000 asset.
- If the home appreciates while you wait, you capture that gain instead of chasing a rising price.
- Your savings are not tied up. The cash you did not spend stays available for furniture, reserves, or emergencies.
- The CMHC premium can be rolled into the mortgage, so it does not need to be paid in cash up front (only the Ontario PST on it does).
What it costs you
- You pay a $28,000 CMHC premium. Financed over 30 years, that adds roughly $19,000 in interest on top.
- Your monthly payment is about $596 higher, every month.
- You need roughly $24,000 more household income to qualify.
- With less than 20% equity, you have a thinner cushion if values dip in the short term.
Waiting to save 20%: the honest pros and cons
What you gain
- You skip the $28,000 CMHC premium entirely, and the interest it would have carried.
- Your monthly payment is about $596 lower, and you qualify with roughly $24,000 less income.
- A 20% down conventional mortgage opens up more lenders and banking options, including those that do not offer insured products, which can mean sharper rates and terms.
- Borrowing less means more of every payment goes to principal from day one.
- A larger equity cushion gives you more flexibility and protection if the market softens.
What it costs you
- You spend roughly two more years renting, with no equity to show for it.
- You need to find an extra $100,000 in cash, which is a heavy lift on its own.
- If prices rise while you save, your target keeps moving and the home you want may cost more.
- You lose the head start on paying the mortgage down.
The point people miss: income and qualifying power
It is easy to frame 20% down as just “avoiding the CMHC premium.” The bigger story is income and lender access. Because the 20% buyer carries a smaller mortgage, she qualifies on roughly $24,000 less household income (about $127,000 versus $151,000 in our example, using the federal stress test). A conventional mortgage is also not bound by insurer rules, so more lenders compete for it, including credit unions and bank products that do not play in the insured space. That can mean a sharper rate, a more flexible product, or approval for a slightly larger purchase.
On amortization, both paths here can stretch to 30 years: conventional 20% mortgages always allow it, and since the December 2024 rule change a first-time buyer with 5% down can too. That is why the numbers above already use 30 years. Choosing a shorter 25-year amortization on either path would raise the monthly payment but cut total interest meaningfully, another lever to weigh.
So which is right?
There is no universal winner. It comes down to your cash position, how stable your market feels, and whether the wait is months or years. Here is how we tend to frame it with clients:
5% tends to win when
You can comfortably carry the higher payment, prices are flat or rising, and waiting would mean years of renting while the market moves. Getting in and starting to build equity often beats chasing a 20% target that keeps drifting away.
20% tends to win when
The 20% is within reach soon (a gift, a bonus, a sale), the extra payment would stretch you thin, or you want maximum lender choice and the cleanest long-term cost. If you can get there without a long wait, the savings are real.
How we actually help with this
When a first-time buyer brings us this question, we do not guess. We sit down with your numbers and your mortgage advisor, model both paths against the specific home and timeline you are looking at, and stress-test what happens if rates or prices move. The goal is not to talk you into buying sooner or waiting longer. It is to make sure that whichever path you choose, you chose it with the full picture in front of you.