Why Waiting to Save for a 20% Down Payment Could Cost You More

April 23, 2024

Are you a first-time homebuyer feeling overwhelmed by the daunting task of saving for a 20% down payment?

In this video, we why explore why grinding to save 20% for your down payment may actually end up costing you more and reveal why an insured mortgage in Toronto might be the key to achieving your homeownership dreams sooner than you think.

With Toronto’s housing market experiencing steady growth over the past two decades, waiting to save that 20% down payment could mean continuously chasing a moving target. We break down the numbers and show you how the seemingly endless cycle of saving can actually lead to paying significantly more as home prices continue to rise.

The math

Over the past 20 years from 2003 to 2023 Toronto home prices have appreciated on average 6.96%. The cost of high ratio mortgage insurance through CMHC costs anywhere between 2.85% to 4.00% depending on how much down payment you have. The other factor in this equation is that purchasing with less than 20% down gives you access to insured mortgage rates which are consistently the lowest rates in Canada.  The lower mortgage interest rates lower the effective cost of the insurance premium. 

So we can generalize and say that every 12 months of saving means that the purchase price of your home potentially increases by 6.96%.

However if you buy with less than 20% down payment, lets say 10% down payment,  the insurance premium is 3.10%. In addition you get the benefit of the lower interest rate. So overall the cost is lower to buy with an insured mortgage rather than wait the 12 months to continue to save.


It is worth mentioning a few caveats.

  1. If you do have 20% down payment then putting 20% down is optimal rather than taking an insured mortgage. The insurance premium is more expensive than the rate savings. So if you have 20% use it.
  2. The 6.96% annual increase to GTA home prices is not linear. Some years it’s higher. Some years we see decreases to home prices as we saw in 2022/23. However in normal market conditions the argument holds true. If we are in a falling market then you can assess the expected decline and it is possible to determine that saving the 20% is more optimal.

Stop waiting on the sidelines and start taking proactive steps towards owning your own home. Join us as we navigate through the complexities of the housing market and empower you to make informed decisions that align with your financial goals.


Christopher Molder

Mortgage Broker

Christopher is a mortgage broker based in Toronto, Canada. And a son of a broker too. He’s a second generation mortgage broker. Following in his father’s steps he joined the family mortgage business straight out of university.