What homeowners should understand before assuming they need to sell first
Many homeowners are surprised to learn this: you don’t always need 20% down to purchase your next home.
A common belief is that once you already own a property, your next purchase automatically requires a full 20% down payment. For many people, that assumption alone can delay a move for years.
In reality, you may be able to buy your next home with as little as 5% down, even if you already own a home, as long as the new property will be your primary residence.
How the 5% Down Option Works
In Canada, insured mortgages allow buyers to purchase a principal residence with a minimum of 5% down (on the first $500,000 of the purchase price), subject to lender qualification and mortgage insurance approval.
What many homeowners don’t realize is that this option can still apply even if you already own a home, provided that:
- The new property will be your primary residence.
- You qualify based on income, debt ratios, and credit.
- The overall numbers make sense from a lending perspective.
Every situation is different, but simply owning an existing home does not automatically eliminate lower down payment options.
Do You Have to Sell Your Current Home First?
Not necessarily.
In some cases, homeowners are able to:
- Purchase their next home as their primary residence.
- Keep their current home.
- Rent out the existing property as a long-term investment.
I often see this with clients who are:
- Relocating for work.
- Outgrowing their current home.
- Experiencing life changes such as marriage, divorce, or a growing family.
Rather than selling, they keep their first home as a rental and move into their next property, gradually building long-term equity and flexibility.
When This Strategy Makes Sense (and When It Doesn’t)
This approach is not right for everyone.
The rules are specific, and the numbers matter:
- Debt service ratios must still qualify.
- Rental income is only partially counted by lenders.
- Mortgage insurance premiums apply.
- Cash flow, reserves, and risk tolerance all matter.
For the right situation, however, this can be a powerful stepping stone — allowing homeowners to move forward without waiting years to save a larger down payment.
The Biggest Mistake Homeowners Make
The biggest mistake I see is assuming something isn’t possible without ever running the numbers.
Too many people delay moves, opportunities, or life changes simply because they were told once that they “need 20% down,” without exploring what options actually exist today.
Final Thoughts
If you’re thinking about moving, upsizing, or simply want to understand what this could look like in your specific situation, it’s worth getting clarity.
You don’t need to make any decisions, sometimes a quick conversation is enough to understand what’s realistic and what isn’t.
I’m always happy to walk you through the options and help you determine the best next step based on your goals.
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Written by Amanda Blake
Top Listing Agent | Owner & Broker
Lime Green Realty® Central
Serving Red Deer & Central Alberta
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