Where Can Your Down Payment Come From? Every Legal Source, Explained
Ask most first-time buyers about their down payment and you'll hear one word: savings. But "just save it" is only one of six legitimate sources Canadian lenders accept — and the buyers who close fastest are usually the ones stacking three or four of them at once.
Every source comes with its own rules, tax treatment, and paperwork. Here's the complete menu, including the documentation lenders will actually demand, because a down payment that can't be traced is a down payment that doesn't count.
First, the Minimums
The floor is set by federal rules: 5% of the first $500,000 of the purchase price and 10% of the portion between $500,000 and $1.5 million. Homes at $1.5 million or above can't be insured, so they require 20% down. Anything below 20% means mortgage default insurance — the premium mechanics are in our CMHC guide.
So a $750,000 home needs at least $50,000 down ($25,000 + $25,000). Where can that $50,000 legally come from?
Source 1: The FHSA — Use This First
The First Home Savings Account is the best deal in Canadian personal finance for first-time buyers, full stop. Contributions are tax-deductible like an RRSP ($8,000 of room per year, $40,000 lifetime), growth is tax-free, and qualifying withdrawals for a first home are tax-free — deduction on the way in, no tax on the way out. Nothing else in the tax code does both.
Two tactical notes. Room only starts accruing once you open the account, so open one now even with $50 — your future self collects the accrued room. And unused contributions carry forward (up to $8,000 of carry-forward), so a couple who each opened FHSAs three years before buying could shelter a meaningful five-figure sum between them. There's no repayment obligation — the money is simply yours. Full mechanics in our FHSA vs RRSP guide and the FHSA/RRSP resource page.
Source 2: The RRSP Home Buyers' Plan
The HBP lets each first-time buyer withdraw up to $60,000 from their RRSP tax-free — $120,000 for a couple — provided the funds have sat in the RRSP at least 90 days. Unlike the FHSA, this is a loan from your own retirement: repayments run over 15 years, and any year you skip a repayment, that amount is added to your taxable income. (For the long-game view of what borrowing from your RRSP means for retirement, see our companion site The Retirement Beast.)
The classic power move for buyers with cash but little existing RRSP room to spare: contribute, harvest the tax refund, wait 90 days, withdraw under the HBP. The refund itself becomes extra down payment. And yes — you can use the FHSA and the HBP for the same purchase. A disciplined couple maxing both can theoretically put $200,000 of tax-advantaged money on the table.
Source 3: Plain Old Savings and Investments
Cash in savings accounts, GICs, TFSAs, or non-registered investments — all fully acceptable, with one universal catch: the 90-day paper trail. Lenders (pushed by anti-money-laundering rules) want three months of statements for every account the money touched. Large deposits that appear from nowhere will each need an explanation and documentation.
Practical advice: consolidate your down payment into one account three-plus months before house hunting, and stop moving it around. Every transfer between accounts is another statement you'll be asked to produce. Selling investments? Keep the confirmation slips. The TFSA deserves special mention as the flexible workhorse here — no withdrawal tax, no repayment, and the withdrawn room comes back the following January.
Source 4: Gifted Funds
The famous "Bank of Mom and Dad" is fully legitimate in the eyes of lenders and insurers, with conditions. The gift must come from an immediate family member (parent, grandparent, sibling — policies vary at the edges), and it must be a true gift, documented by a signed gift letter stating the amount, the relationship, and — critically — that no repayment is expected or required. Lenders may also want to see the funds deposited in your account (often 15+ days before closing) and occasionally evidence of the giver's ability to provide it.
What lenders are screening out is disguised debt: a "gift" that's secretly a loan changes your debt ratios and, undisclosed, crosses into misrepresentation. If your family wants repayment, structure it honestly — some lenders accept documented family loans, or the family member can instead co-sign, which is a different tool with different trade-offs.
One more wrinkle: if a gift arrives after you've been pre-approved, tell your broker or lender immediately. Down payment composition is part of the file; surprises at funding are never welcome. (See our pre-approval guide for the full list of things not to change mid-process.)
Source 5: Sale Proceeds and Windfalls
Equity from a property you're selling, an inheritance, a legal settlement, a genuine lottery win — all acceptable, all requiring documentation of origin: the sale agreement and trust ledger, the estate paperwork, the settlement letter. Windfall money is easy to verify and lenders like it. Timing is the only trap: if your purchase closes before your sale, you'll need bridge financing, which is routine but must be arranged in advance.
Source 6: Borrowed Down Payments — Legal, Narrow, Usually Unwise
Canada does allow borrowed down payments in limited circumstances — a personal loan or line of credit funding what insurers call a "non-traditional" down payment. The catches stack up fast: it's only possible within certain insured programs, the loan payments count against your debt ratios (shrinking your mortgage approval), premiums are higher for non-traditional sources, and you're starting homeownership with negative equity math.
If the only path to 5% down is borrowing the 5%, the honest reading is usually that the purchase is early. Run the numbers in the affordability calculator — including the loan payment — and see whether the answer changes.
Stacking: How Real Buyers Get to the Number
A realistic example. Maya and Sam, both first-time buyers, target a $700,000 townhouse — minimum down payment $45,000, but they want $70,000 to shrink the insurance premium and their monthly payment.
FHSA: $38,000 combined after three years of contributions (plus the ~$9,000 in tax refunds those deductions generated along the way, which they saved too). HBP: $20,000 from Sam's RRSP, within the 90-day rule. Gift: $15,000 from Maya's parents with a signed gift letter. Total: $73,000, fully documented, three sources, each with its own paper trail assembled before the pre-approval application.
Don't forget the money beside the down payment: lenders typically want to see closing costs — roughly 1.5–4% of purchase price — available on top, and our closing costs guide itemizes what's coming.
The Bottom Line
Down payments aren't saved so much as assembled — from tax-advantaged accounts working in the right order (FHSA first, then HBP, then TFSA), family help documented properly, and ordinary savings with a clean 90-day trail. Start the assembly 6–12 months before you shop: open the FHSA today for the room, make RRSP contributions cross the 90-day line, park everything in one account, and collect your paperwork as you go.
Then find your real target with the affordability calculator — and see where the down payment fits in the larger sequence in the first-time buyer roadmap.