First-Time Home Buyer Programs vs. Minimum Down Payment Rules: Clearing Up the Confusion
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One of the most common misconceptions I hear from homebuyers is that only “first-time home buyers” can put down just 5% on a home purchase. Nothing could be further from the truth.
While certain first-time home buyer incentive programs have strict eligibility rules, the ability to buy with a minimum down payment of 5% is available to everyone—regardless of whether you’ve owned a home before. Let’s break down the difference and what it means for you.
The Key Distinction: Incentives vs. Down Payment Rules
First-time home buyer programs (like the Home Buyers’ Plan, FHSA, or provincial land transfer tax rebates) are special incentives designed to help newcomers to homeownership. These typically require you to qualify as a “first-time buyer,” which generally means:
You (and your spouse/common-law partner) haven’t lived in a home you owned in the last 4 calendar years
You intend to occupy the home as your primary residence
You meet other program-specific criteria (age, residency, etc.)
However, the 5% minimum down payment rule is a completely separate regulation under Canada’s mortgage insurance rules (CMHC, Sagen, etc.). This allows any qualified buyer to purchase a home with as little as 5% down on properties up to $500,000 (scaling up to 10% on the portion between $500K-$1M, and 20% above $1.5M).
Who Can Put 5% Down? (Spoiler: Pretty Much Everyone)
First-time buyers: Yes, they can use 5% down plus access incentive programs
Previous homeowners: Yes, they can still use 5% down (if they qualify for mortgage insurance)
Investors: No, minimum is typically 20% down
Repeat buyers: Yes, 5% down is still available regardless of past ownership
The only requirement for the 5% down payment is that you qualify for high-ratio mortgage insurance—which depends on your credit, income, debt ratios, and property price, not your homeownership history.
Real-Life Example: Sarah’s Situation
Sarah owned a condo 5 years ago but sold it to move abroad for work. Now back in Canada and looking to buy again, many agents told her she couldn’t put just 5% down because she “wasn’t a first-time buyer.”
The reality: Sarah can still put 5% down on a $450,000 home ($22,500 down payment) and get CMHC insurance, just like any other buyer. She misses out on first-time buyer tax credits or RRSP withdrawal programs, but the minimum down payment flexibility remains hers.
Why the Confusion Persists
The mix-up happens because real estate agents and lenders often bundle these concepts together when marketing to first-time buyers. While incentives are exclusive, the 5% down payment threshold is a universal rule that opens homeownership to a much broader group of Canadians.
Bottom Line
If you’re worried about saving 20% for a down payment, rest assured that 5% down remains available to nearly all qualified homebuyers—first-timers and repeat buyers alike. The first-time buyer label only unlocks the bonus incentives, not the basic mortgage rules.
Curious if you qualify for 5% down, first-time buyer incentives, or need help sorting through your options? Reach out to me, Mr. Mortgage (Kechanth Kannan)—I’ll clarify exactly what programs and down payment flexibility work for your situation.
📸 Instagram: @_mrmortgage
Don’t let misconceptions hold you back from homeownership—let’s get you the facts and a clear path forward!
