5% vs 20% down on a Montréal duplex: stress-tested over 10 years

The standard advice — "always put 20% down to avoid CMHC" — isn't wrong, but it hides the real trade-off. Putting 5% down on an owner-occupied Montréal duplex frees up $93,750 of capital and adds $25,000 of CMHC premium to your loan. Whether that's a good trade depends on what you do with the freed capital. Let's walk through the numbers.

The scenario

Owner-occupied $625,000 duplex in Rosemont. You live in one unit, rent the other. Rate 5.25% fixed, 25-year amortization, $1,800/mo rent on the rented unit. Owner occupies, so the minimum down is the standard insured-mortgage minimum: 5% on the first $500k and 10% on the rest, capped at $1.5M for insured mortgages.

Right out of the gate, the 5%-down version has roughly $660/month higher mortgage payment for $87,500 less cash at closing. That's a spread of ~9% per year on the freed capital — roughly the threshold for whether deploying that capital elsewhere beats putting it into the property.

Month-one cashflow comparison

Owner-occupier carrying costs (your half) plus the rented unit's contribution:

With 5% down, you carry a $2,911/month shelter cost. With 20% down, $2,250/month. The difference: $661/month, or $7,932/year. Over 10 years undiscounted, that's $79,320 of extra cash out the door for the lower-down-payment scenario.

For comparison, a 1-bedroom rental in Rosemont runs ~$1,500/mo. The 20%-down scenario costs $750/mo more than renting just unit 2; the 5%-down scenario costs $1,400/mo more. Both buy you ownership, principal paydown, and exposure to appreciation — but the 5%-down version makes you feel that cost much harder.

The 10-year equity build

Assuming flat 3% annual appreciation and steady amortization at 5.25%:

Both scenarios end roughly in the same place after 10 years — the 20%-down version wins by about $83,000, which is exactly the difference in down payment ($87,500) minus the small cashflow gap. That's not coincidence; it's the math working out.

The opportunity-cost case for 5% down

Here's where the standard advice breaks down: the comparison above assumes the $87,500 you'd save by going to 5% down just sits in cash. It doesn't have to.

If you take that $87,500, deploy it into a TFSA-sheltered S&P 500 ETF, and hit the long-run ~7% real return:

After 10 years your alternative investment is worth ~$172,000 — $84,500 more than what it started at. That gain almost exactly offsets the $83,000 advantage of the 20%-down scenario. The two paths produce similar 10-year wealth.

The 5%-down path wins if:

• You can earn more than ~7% real on the freed capital (aggressive equity portfolio, business reinvestment, real estate elsewhere).
• You expect home appreciation above 3%/year.
• You value liquidity — having $87k in a TFSA you can pull from if you lose your job is worth real money in peace-of-mind terms.
• You're young enough that compounding the freed capital matters more than reducing your monthly payment.

The 20%-down path wins if:

• You'd otherwise spend the freed capital instead of investing it (extremely common — be honest about your behavior).
• You hate carrying high monthly costs and the $660/month gap stresses you out.
• Rates rise meaningfully at renewal — the 5%-down version's larger loan is more exposed.
• Home appreciation underperforms — the 5%-down loan stays large relative to property value.

What happens if rates rise at renewal?

Year 5 renewal, with the same outstanding balance and 20-year remaining amortization. Stress test at +200bps (rate goes from 5.25% to 7.25%):

Both scenarios get hit, but the 5%-down version takes a bigger absolute hit because the loan is larger. If your income is flat and your other costs have inflated, this is where a high-LTV insured mortgage becomes uncomfortable.

So which down payment should you actually use?

Honest framework:

• Put down 5% if you're a disciplined investor with a clear plan for the freed capital, you have stable income, and you're comfortable with higher monthly costs and CMHC insurance for the first decade.
• Put down 10–15% as a middle-ground compromise — lower CMHC premium tier ($31k → $18k for the same example), still keeps significant capital free.
• Put down 20% if you don't have a credible plan for the freed capital (you'd just spend it), if rate stress at renewal worries you, or if you simply want the lowest stress structure.
• Put down 35%+ only if you really can't deploy the capital elsewhere productively. Above 20% the marginal benefit drops fast — you're saving 5.25% interest but giving up potentially 7%+ alternative returns.

A note on what you can actually qualify for

The above assumes you qualify for both options. With 5% down, you qualify for a slightly larger maximum purchase price (because the calculation uses LTV not absolute mortgage size), but the OSFI stress test still binds — you must qualify at rate + 2% or 5.25%, whichever is higher. For an owner-occupied duplex, lenders count 50–70% of unit-2's expected rent toward your qualifying income, which helps a lot.

Bottom line

On a $625k Montréal duplex over a 10-year hold, 5% down and 20% down produce roughly the same end-state wealth — if you invest the freed capital well. If you don't, 20% down wins by tens of thousands of dollars and feels much less stressful month-to-month.

Run the numbers for your specific scenario before deciding. Use the rent-vs-buy calculator if you're also weighing not buying at all; use the stress-test calculator to make sure renewal rate increases don't blow up your budget.