5% Down or 20% Down: What the Smaller Deposit Costs Over 25 Years

The first time your savings pass $25,000, a $500,000 home starts to look reachable. That's the minimum down payment, and waiting to save $100,000 for 20% can feel like watching prices drift out of reach while you pay rent. Below, I'll put both deposits on the same home so you can see what the smaller one adds to your monthly payment and to 25 years of financing costs.

If you've ever checked your savings against a listing, felt that rush of relief, and then felt a knot about the monthly bills, this is the comparison to run before you commit. The relief is real. So is the bill. A smaller down payment lowers the cash you need to buy, and it raises the cost of owning the mortgage.

What 5% and 20% down cost on the same $500,000 home

Take an illustrative $500,000 purchase in Vernon. To isolate the financing choice, hold everything else still: monthly payments, a 25-year amortization (the time it takes to pay the loan to zero), a 5% rate compounded semi-annually, no extra payments, and a rate that never changes. That's a comparison tool, not a forecast.

The $19,000 line is mortgage default insurance. Any mortgage above 80% of the home's value needs it. With 5% down, CMHC's standard premium is 4% of the mortgage before the premium: 4% of $475,000 is $19,000. Many buyers assume the insurance covers them in some way. It covers the lender if the borrower stops paying, and the borrower pays the premium.

Most buyers add the premium to the loan, as the table assumes. You can pay it upfront instead, but either way it costs $19,000. With it rolled in, you start out owing $494,000 on a $500,000 home, so your real equity on day one is about $6,000.

Is buying sooner worth an extra $89,000?

Keeping $75,000 out of the down payment means borrowing $94,000 more. Under these assumptions that adds about $547 to every monthly payment and roughly $89,000 in financing costs over 25 years: the $19,000 premium plus about $70,000 in extra interest. The rest of the higher payment is principal, which repays debt and builds equity in your own home. The $89,000 is the part you never get back.

That cost buys you something. You get keys sooner, you stop paying rent sooner, and $75,000 stays in your hands instead of in the house. Those can matter a great deal. None of them makes the extra debt smaller.

Real quotes will shift the numbers. Insured mortgages often get lower rates than uninsured ones, which narrows the gap, and your rate will reset at each renewal. So ask for both options using the actual quoted rates and the same 25-year amortization, and compare the starting debt, not just the deposit.

Then check what's left in your account after the down payment and closing costs. Skipping insurance isn't worth emptying your savings so that a failed furnace or a gap between jobs lands on a credit card. And treat waiting as its own calculation: the rent you'd pay, what you'd add to savings, and a future purchase price nobody can promise. The table can't settle that part.

The 5% minimum tells you when a lender will let you buy. It doesn't tell you how much you should put down. Whichever deposit you choose, start by asking for paired mortgage quotes on the same home, one at the minimum and one at your largest comfortable deposit. Each should show the monthly payment and the cash you'll have left after closing. Seeing those two numbers side by side will show you how much monthly breathing room it costs to move in sooner.