Down payment loans in Canada
In order to get into the market, some money up front is required. For many Canadians, saving up a down payment on their own just isn’t possible. A personal loan can help with that. Whether you’re looking for a loan for a down payment in Canada for a home or vehicle, Spring Financial can help.
Spring Financial offers unsecured personal loans from $500 to $35,000, with terms of 6 to 84 months and fixed rates starting at 9.99%. Depending on how long the verification process takes, you may receive your funds the same day you apply.
Your down payment questions, answered
How much can I borrow for a down payment in Canada?
With Spring Financial, you can borrow up to $35,000, which is helpful if you need a 5% down payment loan in Canada. If you’re looking to purchase a home for $500,000 or less, the minimum down payment you’ll need is 5%. On a $500,000 home, this amount is only $25,000. With a $35,000 loan, you could cover that cost and still have room for closing costs.
If you’re looking to purchase a home over $500,000, the minimum down payment increases to 5% on the first $500,000, then 10% on the remainder up to $1,499,999.
Can you legally use a personal loan as a down payment for a house in Canada?
While you can use a borrowed down payment, you must disclose it to your mortgage broker. This is mandatory, and any misrepresentation of the source of your down payment is considered to be mortgage fraud. It’s important to note that since your down payment is now treated as a debt obligation, it will affect your debt-to-income ratio, which can impact the mortgage amount that you qualify for.
Can you use a borrowed down payment with an insured mortgage?
If you are getting an insured mortgage, whether or not you can use borrowed funds depends on the insurer. With CMHC insurance, you’re not allowed to use borrowed funds for insured mortgages. So, if you’re putting less than 20% down through a federally regulated lender using CMHC insurance, you won’t be able to use a personal loan as your down payment.
However, Sagen (one of Canada’s private mortgage insurers) offers a Borrowed Down Payment Program for qualifying buyers through approved lenders.
How will a loan impact your debt service ratio?
When it comes to debt service ratios, there are two that matter. These are the Gross Debt Service (GDS) and Total Debt Service (TDS). With most lenders, the TDS cap is 44%. So, with a $25,000 loan using current rates and a 5-year term, you’re looking at adding around $700 per month to your TDS. This can reduce the mortgage amount that you qualify for.
Can I use a personal loan for a vehicle down payment?
One of the most practical uses for a personal loan is a vehicle down payment. Since the funds aren’t for a home, you don’t have a mortgage insurer to navigate or a stress test to pass.
If you’re purchasing a car and want to increase your down payment to reduce your monthly payments, or even qualify for better financing terms, a personal loan is a great choice. With Spring Financial, the funds are deposited directly into your bank account and can be used for whatever you like.
Can I use a down payment loan for an investment property?
When purchasing an investment property, the minimum down payment required is 20%. Since these generally don’t involve insured mortgages, using a borrowed down payment is acceptable.
When it comes to an owner-occupied second home, the rules can vary depending on your lender. That said, conventional mortgages give more flexibility on accepted funding sources than insured mortgages do.
How fast can I get my down payment funds?
With Spring Financial, most approved applications are funded within 1-2 business days. However, if the verification process is completed quickly, then the funds can be available the same day. If you already have a firm closing date, you should apply as early as possible and have your documents ready.
Can I qualify for a down payment loan with bad credit?
Spring Financial considers applications from those with all credit profiles, including those with lower credit scores. While your approval isn’t guaranteed, your eligibility is based on your income, existing debt, and the overall affordability of the loan, not just your credit score. Even if you have a score below 579, you can still get a loan; however, your rate will reflect the lender’s risk assessment.
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How Spring Financial compares to banks for down payment financing
Bank Personal Loan
Line of Credit
Family Loan
- Loan Amount
- $500–$35,000
- Varies
- Varies
- Varies
- Rate range
- 9.99%–34.95%
- 8%–20%
- Prime + spread
- Often 0%
- Bad credit eligible
- Yes
- Typically no
- Typically no
- N/A
- Fully online
- Yes
- Mostly branch-based
- Mostly branch-based
- N/A
- Fixed payments
- Yes
- Yes
- Interest-only option
- Flexible
- Credit bureau reporting
- Equifax + TransUnion
- Yes
- Yes
- No
- No prepayment penalty
- Yes
- Varies
- Yes
- N/A
- Approval speed
- Often the same day
- Days to weeks
- Days to weeks
- Immediate
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Spring Financial offers down payment loans in Ontario and across Canada. You can apply fully online throughout the country.
How to apply with Spring Financial
The entire application process is online and can be completed directly from your device.
Complete the online personal loan application.
Enter your information and submit the required verification documents.
Get reviewed.
Spring Financial reviews your application and may request additional documentation. Our team may reach out to confirm details.
Receive your funds.
If you’re approved and all your documentation is complete, funds are deposited directly into your verified bank account. Most approved applications are funded within 1–2 business days. In certain cases, you can receive your funds as soon as the same day; however, this is subject to verification.
Who can qualify?
To apply, you'll need:
Valid government-issued photo ID
An active Canadian bank account for online verification
Proof of income (pay stub; most recent tax filing for self-employed applicants)
Current contact information
To be eligible, you must:
Be the age of majority in your province or territory
Have valid government-issued identification
Have an active Canadian bank account
Have a steady source of income
Accepted income types include employment, self-employment, CPP, OAS, disability benefits, pensions, ODSP, Ontario Works, and certain types of Employment Insurance.
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Over one million applications received | Founded 2014 | Reports to Equifax & TransUnion
I was able to get a loan against all odds with a young credit history, high credit utilization, and a low bank balance. I was approved when I needed it most. Their process was smooth and professional. I’m truly grateful!
Emmanuel · Toronto, ON
“I was in need of emergency financial assistance, and Spring assisted me with funds in record breaking time, they gave me an affordable repayment plan. I am so grateful to them and would recommend you give them a try.”
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“They made it very easy to get the loan I was looking for. They are very courteous, professional, and communication was very good. They made sure I understood all terms and options. I can’t recommend them enough.”
Andrew · Vancouver, BC
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Learn more about down payment loans in Canada
Contents
The minimum down payment requirements in Canada
In Canada, the minimum down payment is set by the federal government and depends on the home’s purchase price. For homes priced up to $500,000, the minimum down payment is 5%. For homes that are priced above $500,000 and under $1,500,000, you pay 5% on the first $500,000 and 10% of the remainder. Once you hit $1.5M, you can no longer get an insured mortgage, and the minimum down payment is 20%.
Before you purchase a home, keep in mind that these are minimum allowable amounts, not targets. As soon as you put down less than 20% on your home, then mandatory mortgage loan insurance, also known as mortgage default insurance, is triggered. This insurance is intended to protect the lender, not the buyer, and can add an insurance premium of 0.6% to 4.5% of the mortgage amount. This is decided upon based on your loan-to-value ratio. This premium is then either paid up front or added to your mortgage principal.
How to use personal loans as a down payment source
A personal loan is a lump-sum that is repaid over a fixed term at a fixed interest rate. Once you’re approved, the funds are deposited into your bank account as cash, allowing you to use them toward your down payment on a home or vehicle purchase.
The advantage of using a personal loan over a line of credit lies in its structure. With a personal loan, you know exactly what you owe each month, when the loan ends, and there’s no temptation to redraw the funds. Having a predictable repayment schedule alongside your new mortgage can make the debt easier to manage.
One of the tradeoffs, however, is that the personal loan will appear as part of your total debt obligations. Every dollar that you borrow adds to your TDS rate, which reduces the total mortgage amount that a lender will give you. If you’re already on the edge of borrowing, then a loan could hinder you. If you have a large amount of income headroom, then it could be a great option.
With Spring Financial, you can get a personal loan with fixed rates ranging from 9.99% to 34.95%(APRs from 9.99% to 35.00%) and terms ranging from 6 to 84 months. Plus, all Spring loans are open, meaning that you can pay them down early without any prepayment penalties.
How to use a personal loan for a vehicle down payment in Canada
While a down payment for a home is the most common, many also choose to use a down payment for a vehicle purchase. Using a personal loan is one of the best ways to do this. This can be done through banks, credit unions, and even lenders like Spring Financial.
When you’re purchasing a vehicle, putting down a larger down payment can lower your loan-to-value ratio with the dealership or auto lender, which can get you a lower interest rate on the car loan, smaller monthly payments, or both. With dealer financing, a 10-20% down payment is often required to secure the most competitive rates.
Spring Financial offers personal loans up to $35,000, and you’re able to use the funds as a vehicle down payment. No disclosures are required to get a loan, and the funds will be deposited directly into your bank account.
The RRSP Home Buyers' Plan: using it to purchase a home
For those who invest in an RRSP, a common way to gain access to funds for a down payment is the Home Buyer’s Plan (HBP). This allows first-time home buyers to withdraw up to $60,000 from their Registered Retirement Savings Plan to put toward a qualifying home purchase. These funds are tax-free at the time of withdrawal, and since each partner in a couple can withdraw up to this amount, you can access up to $120,000 together.
That said, you do have to repay these funds. You have 15 years to return the funds. If you miss a repayment for the year, there are no tax penalties, but the missed amount is added to your taxable income for that year. Essentially, you’re taking out a loan against your own retirement savings.
In order to qualify for the HBP, you must be a first-time home buyer. This means that you haven’t owned a qualifying home in the previous four calendar years. The home must also be your primary residence, and the RRSP contributions must have been in your account for at least 90 days before the withdrawal. Only primary residences are covered with the HBP.
If you don’t have an RRSP or your RRSP funds aren’t enough to cover the cost of the down payment, then a personal loan can help cover the remaining balance.
The First Home Savings Account: What it means for your down payment?
Another registered account that can help you purchase a home is the First Home Savings Account (FHSA). This account was introduced in 2023, and it combines the tax benefits of both an RRSP and a TFSA. All of your contributions are tax-deductible, and all qualifying withdrawals for a home purchase are tax-free.
The annual contribution limit for the FHSA is $8,000, and the lifetime contribution limit is $40,000. Any unused contribution room carries over to the next year; however, you can contribute to this account for up to 15 years or until you turn 71, whichever comes first. A financial advisor can always help you with investment advice if you aren’t sure if this is the best option for you or not.
If you’ve been contributing to your FHSA but don’t quite have enough, you can take out a personal loan to cover the shortfall. In fact, a down payment loan can complement any down payment funds quite well. Using registered accounts is always a great idea, but a personal loan can add just enough to help you reach your goals just a little bit faster.
Down payment assistance programs in Canada: what first-time home buyers qualify for
payments. Understanding how they work can help you determine whether a personal loan fits into your overall strategy.
RRSP Home Buyers’ Plan
If you’re a first-time home buyer with RRSP savings, you can access up to $60,000 to use towards a down payment. It’s tax-free and can be repaid over 15 years. This is essentially an RRSP First-Time Home Buyer Plan loan.
First Home Savings Account (FHSA)
With an FHSA, you can save up to $40,000 using tax-deductible contributions to purchase your first home.
Provincial programs
Many provinces and territories in Canada offer down payment grants or down payment assistance loans to help eligible buyers purchase a home. For example, Nova Scotia offers assistance programs to first-time buyers in rural areas. These programs vary based on where you’re located, so contacting a mortgage broker or provincial housing authority can help you discover what’s available.
GST/HST New Housing Rebate
Those looking to buy a newly constructed home can gain access to a partial rebate. This can significantly reduce your upfront costs.
Gift from family
Money that’s gifted to you can also be used to purchase a home. However, this must be gifted to you by an immediate family member and must include a documented gift letter stating that they don’t require repayment. The letter must also include the donor’s name, relationship, the exact amount, and confirmation that repayment isn’t expected.
When purchasing a home, a personal loan is intended to fill gaps that registered accounts and programs cannot cover. It’s not meant to replace your savings, but to cover the difference and reduce the timeline on purchasing a home.
How a borrowed down payment affects your mortgage qualification
When a mortgage lender calculates whether or not you can afford a mortgage, they look at your income and how it relates to your total debt obligations. The standard measure is the Total Debt Service (TDS) ratio.
TDS = (housing costs + all monthly debt payments) ÷ gross monthly income |
With most lenders, it’s preferred that your TDS is under 44%. If you have a $25,000 personal loan at around 25% over 5 years, you’re looking at a monthly payment of around $734. Just this one monthly payment can reduce your mortgage amount. If you have more existing debt, then your mortgage amount is impacted even further.
Another thing to consider is that, in Canada, insured mortgage applicants must pass a stress test. This means that you need to qualify at around 5.25% or your offered rate plus an additional 2%, whichever is higher. Any personal loan payments that you have are also factored into this calculation.
This doesn’t mean you shouldn’t borrow to get your down payment; it just means you need to consider the total cost before you apply. If you speak to a mortgage broker, they can do this stress test calculation for you and let you know how a loan will impact your purchasing power.
Are down payment loans a good idea for first-time home buyers?
When it comes to down payment loans, first-time home buyers have the most to gain. However, it is a decision that needs careful thought out. With home prices rising, a loan can help you reach your home-ownership goal faster.
Before you consider taking out a first-time home buyer loan in Canada, your FHSA and RRSP Home Buyer’s Plans should be maximized first. If you’ve been contributing to your FHSA for a few years and have around $20,000-$30,000 saved, but you need $50,000 in order to get in at the minimum, then a personal loan can make up that difference to get you into home ownership on your timeline.
However, the impact on the debt service ratio should be considered. If you have a modest income that is unable to absorb a large mortgage as well as a significant personal loan, it likely won’t help you. If you have a strong household income and manageable existing debt, it could be a good option.
Getting down payment loans with bad credit in Canada
Just because you have bad credit, that doesn’t mean that you can’t get a down payment loan. In fact, Spring Financial considers applications from those with any credit score, and there’s no minimum credit score required to apply. Your approval depends on your income, existing debt obligations, and the overall affordability of the loan, not just your credit score.
If your credit score is in the poor range and falls below 579, you can still get a loan, but you’re likely going to end up with a higher interest rate. The question then is whether this still makes sense given the cost of borrowing.
If you’re purchasing a vehicle and need $5,000 for a down payment, a higher-rate personal loan will be worth it rather than draining your emergency savings. When you’re purchasing a home, this is a tougher decision because the personal loan will affect your mortgage amount.
Even if you have a consumer proposal or bankruptcy on your credit report, you can still get a personal loan with Spring Financial. Your eligibility is still based on your overall financial situation, and not just your credit report. Apply today to see if you’re pre-approved, especially if you’re about to start house hunting and are looking into your mortgage options.
You have questions,
we have answers.
Can I legally use a personal loan as a mortgage down payment in Canada?
Yes, you can use a personal loan towards a home down payment. The key, though, is that you must disclose any payments borrowed from a third party to your lender. Failure to disclose that part of your down payment is borrowed is considered to be mortgage fraud. If you have an insured mortgage with CMHC, you’re unfortunately unable to use borrowed funds, but you can with a conventional mortgage. Sagen’s Borrowed Down Payment Program, however, allows qualifying borrowers to borrow funds through approved lenders.
Will using a personal loan for a down payment affect my mortgage approval?
Yes. In fact, the monthly payment on your personal loan will get added to your Total Debt Service ratio, which reduces the size of a mortgage you can qualify for. How much it will impact you depends on the loan amount, rate, and term, as well as your income. Someone with $120,000 in income and no other debt handles that debt differently than someone with a $65,000 income and a car payment.
Can I use a personal loan for a vehicle down payment?
Yes, and it’s actually one of the most common uses. Vehicle down payment loans in Canada are less complex than home down payment loans. The funds will go directly into your bank account, and you can use them whenever you like. Whether you’re purchasing new or used, a down payment loan for a car in Canada can get you a more competitive rate by reducing your loan-to-value ratio.
How does a down payment loan affect my debt-service ratio for a mortgage?
When you borrow money, every dollar you borrow is added to your monthly debt obligations. Lenders calculate your TDS ratio by dividing all monthly debt payments, including your mortgage payments and housing costs, by your gross monthly income. For most lenders, this number needs to be below 44%. With a $20,000 loan at 12% over 5 years, you’re adding roughly $444 per month to your TDS calculation.
What is the First Home Savings Account, and how does it relate to down payment loans?
The FHSA is a registered account for first-time home buyers that allows up to $8,000 in tax-deductible contributions per year. You can have up to $40,000 in lifetime contributions, and qualifying withdrawals for a home purchase are completely tax-free. It’s considered one of the best savings vehicles for first-time homebuyers. A personal loan shouldn’t be a substitute for savings, but it can help bridge the gap.
While your FHSA isn’t a tax credit, it does qualify as a tax deduction and claiming your contributions can result in a tax refund that can be used towards your personal savings. There are no income limits required to open one, and the contributions don’t impact your RRSP contribution room.
Can I use a down payment loan for a second property or investment property?
For investment properties, the minimum down payment amount is 20%. Since mortgage insurance doesn’t apply, you can generally use borrowed funds. For a second home, it’s up to the lender. However, it’s often acceptable to use borrowed funds for conventional mortgages. If you already own a home, a home equity line of credit can be more cost-effective.
How quickly can I get funds for a down payment if I have a closing date?
With Spring Financial, you can get your funds as soon as the same day; however, this is dependent on the verification process. For most approved applicants, funds are delivered within 1-2 business days. That said, it’s recommended that you apply as early as possible and have your documentation ready.
Can I get a down payment loan in Canada with bad credit?
Spring Financial accepts applications from individuals with all types of credit, including those with lower credit scores. Your eligibility is assessed based on income, existing obligations, and your overall financial situation, so approval isn’t guaranteed. Since your credit score isn’t the main deciding factor, you can still get approved even if you have a consumer proposal or a bankruptcy on your credit report.
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