Can You Borrow Your Down Payment for a Home in Canada?

Buying your first home is exciting, but saving for the down payment can be one of the biggest roadblocks. If you’re a first-time buyer in Canada, you may be wondering:

Can I use a borrowed down payment to buy a home?

The answer is yes, but there are rules, risks, and lender conditions you need to understand. As licensed mortgage specialists, we are here to break it all down for you.

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What Is a Borrowed Down Payment?

A borrowed down payment refers to funds you borrow—via a personal loan, line of credit, or another source to cover the minimum down payment required when purchasing a home.

In Canada, for a home under $500,000, you need at least 5% down. If you haven’t saved enough, borrowing the funds might be an option, provided your credit and income meet lender requirements.

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Is It Allowed by Lenders?

Yes, some lenders and mortgage insurers allow what’s called a flexible down payment, which means the down payment can come from borrowed sources, as long as:

• You have strong credit (typically 650+)
• You show stable employment and income
• You meet debt service ratio guidelines
• The borrowed amount is fully disclosed
• The home is a primary residence

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Which Mortgage Insurers Accept It?

Several major mortgage insurers in Canada allow flexible down payment sources:

• CMHC (Canada Mortgage and Housing Corporation)
• Sagen (formerly Genworth)
• Canada Guaranty

But not all lenders work with these insurers, and not all mortgage brokers offer this solution, so be sure to work with someone who can navigate it for you.

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Advantages of a Borrowed Down Payment

• Get into the market sooner before prices climb further
• Leverage your good credit when savings are limited
• Stop paying rent and start building equity

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What Are the Risks?

This isn’t a one-size-fits-all solution. Consider:

• Higher monthly payments due to the repayment of the borrowed funds
• Potential strain on debt ratios, making it harder to qualify
• Interest costs, especially if you’re borrowing at high rates

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Example Scenario

Let’s say you’re buying a $400,000 condo and need $20,000 down.

You borrow that from a line of credit at 8% interest. That’s roughly $240/month in interest payments (interest-only), which the lender will factor into your debt servicing ratios.

If your income and credit are strong enough, the mortgage may still be approved—but that extra debt can limit how much you qualify for.

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Should You Use a Borrowed Down Payment?

A borrowed down payment can be a useful tool, but it’s not right for everyone. The most important thing is to understand how it affects your mortgage approval and overall affordability.

This is where working with a licensed mortgage specialist makes a difference. We can run the numbers, explain the trade-offs, and match you with a lender who accepts this strategy if it fits your situation.

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Let’s Talk About Your First Home Purchase

Thinking about using a borrowed down payment? Want to know how much you can qualify for? Let’s connect. Contact us and we will guide you every step of the way.

At Indi Mortgage, we offer a fresh, modern approach! One that’s simple, transparent, and built entirely around your needs and long term goals. We believe getting a mortgage shouldn’t feel overwhelming. It should feel empowering and exciting!

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Disclaimer: Borrowed down payment strategies are subject to lender approval and may not be available in all provinces. Speak with us to understand your specific eligibility.