Can You Buy a House With Little to No Down Payment?
I saw this question in a local Facebook group recently:
"Anyone had success buying a house with little to no down payment and good credit?"
The short answer?
Maybe.
Most mortgages in Canada require a minimum down payment, but that doesn't necessarily mean you need years and years of savings before buying a home.
If you have good income and good credit, there may be more options available than you realize.
Let's walk through the most common down payment strategies available to first-time home buyers.
Option 1: Gifted Down Payment
This is often the easiest option.
A parent, grandparent, or immediate family member provides money for your down payment as a gift.
The lender will typically require a gift letter confirming that the money does not need to be repaid.
Benefits:
No loan payment
Doesn't affect mortgage qualification
No interest costs
Challenges:
Not everyone has family who can help.
Option 2: The First Home Savings Account (FHSA)
The FHSA is one of the best tools available to first-time home buyers today.
When you contribute money to an FHSA:
You receive a tax deduction
The money grows tax-free
You can withdraw it tax-free when buying your first home
Unlike the RRSP Home Buyers' Plan, you do not have to pay the money back later.
You can contribute up to the annual FHSA limit and carry unused room forward.
Can You Borrow Money for an FHSA?
Technically yes.
Some buyers use a personal loan or line of credit to contribute to their FHSA.
This isn't a special FHSA loan offered by the bank. It's simply borrowed money being contributed to the account.
The goal is often to generate a tax refund which can then be used to pay down the loan.
This strategy can work for buyers with strong income and credit, but the loan payment will still be considered when qualifying for a mortgage.
Option 3: Your Own Savings
This might sound obvious, but it's still one of the strongest options available.
The larger your down payment:
The smaller your mortgage
The lower your monthly payment
The more flexibility you'll have when qualifying
Many buyers underestimate how quickly a down payment can grow once they have a clear savings plan and are using tools like the FHSA.
Option 4: The RRSP Loan Strategy
This is one of the most misunderstood strategies available to first-time home buyers.
Here's how it works:
Borrow money using an RRSP loan.
Contribute the money to your RRSP.
Leave it there for at least 90 days.
Withdraw the funds through the Home Buyers' Plan.
Use the money for your down payment.
Receive a tax refund from the RRSP contribution.
For example:
A buyer borrows $20,000 and contributes it to their RRSP.
After 90 days, they withdraw the $20,000 through the Home Buyers' Plan and use it as their down payment.
At tax time, they may receive several thousand dollars back depending on their income and tax bracket.
Many buyers use that tax refund to pay down the RRSP loan.
The Catch
This is not free money.
You are still borrowing money.
The loan payment will impact your mortgage qualification and the RRSP withdrawal must eventually be repaid back into your RRSP over time.
For the right buyer, it can be an excellent strategy.
For the wrong buyer, it can make qualifying more difficult.
Option 5: Borrowed Down Payment Programs
Some lenders allow buyers to borrow their down payment directly from:
A line of credit
A personal loan
Other approved sources of financing
This is known as a borrowed down payment.
The lender will want to see that:
The borrower has strong credit
The borrower can handle both the mortgage payment and the borrowed down payment payment
The overall debt ratios still fit within lending guidelines
It's important to understand that borrowed down payment isn't always a separate strategy.
In some cases, buyers are using borrowed funds to contribute to an FHSA or RRSP before ultimately using those funds toward their home purchase.
The source of the money matters, and every lender has different rules.
So Which Option Is Best?
In most situations, I would generally explore options in this order:
Gifted down payment
FHSA contributions
Personal savings
RRSP loan strategy
Borrowed down payment programs
The best option depends on your income, credit, timeline, and overall financial picture.
A strategy that works great for one buyer may be a terrible fit for another.
The Bottom Line
Having little savings doesn't automatically mean homeownership is out of reach.
I've worked with buyers who assumed they needed years to save a down payment only to discover they had options they didn't know existed.
The key isn't finding a shortcut.
The key is understanding all of the tools available and choosing the one that makes the most sense for your situation.
If you're wondering whether an FHSA, RRSP loan, gifted down payment, or borrowed down payment strategy might work for you, reach out and let's build a plan.