Can I Use My Tax Refund for a Down Payment in 2026?
February 20, 2026 | Posted by: Keith Leighton
Can I Use My Tax Refund
for a Down Payment in 2026?
With tax season underway, many buyers are receiving refunds and wondering whether that money can help them purchase a home.
The short answer is yes. You can use your tax refund toward your down payment and closing costs. You simply need to follow proper documentation guidelines.
Why Tax Refunds Can Help Homebuyers
For many households, a tax refund is the largest lump sum they receive all year. The Canada Revenue Agency issues millions of refunds between February and April, often totaling several thousand dollars.
That money can be used for:
• All or part of your down payment
• Closing costs such as legal fees and land transfer tax
• Home inspection and appraisal costs
• Moving expenses
• Required cash reserves
For buyers who are close to qualifying, a refund can move them from planning to purchasing.
Do Lenders Allow Tax Refunds as Down Payment Funds?
Yes, they do.
Most lenders, including major banks and institutions that follow guidelines from Canada Mortgage and Housing Corporation, allow tax refunds to be used toward your down payment.
However, the funds must be:
1. Deposited into your bank account
2. Fully documented
3. Traceable with a clear paper trail
Your mortgage professional will need to verify the source of the funds before final approval.
What Documentation Will You Need?
In most cases, you may be asked to provide:
• A copy of your filed tax return
• Your Notice of Assessment
• Bank statements showing the deposit
• A 90 day history of your account
It is best to keep the refund in one account and avoid transferring it between multiple accounts. This helps prevent delays during underwriting.
How Much Do You Need for a Down Payment in 2026?
Minimum down payment requirements are based on purchase price:
• 5 percent on the first 500,000 dollars
• 10 percent on the portion between 500,000 and 999,999 dollars
• 20 percent for homes priced at 1 million dollars or more
If your down payment is less than 20 percent, mortgage default insurance through providers such as CMHC is required.
Even a refund of several thousand dollars can significantly reduce how much you need to save on your own.
Smart Ways to Use Your Refund Strategically
Before putting the full amount toward your down payment, consider your overall financial position.
Increase Your Down Payment
A larger down payment reduces your mortgage balance and insurance premium.
Improve Your Debt Ratios
Paying down credit cards or loans can improve your Gross Debt Service and Total Debt Service ratios, which may increase your approval amount.
Cover Closing Costs
Closing costs typically range from 1.5 percent to 4 percent of the purchase price depending on your province.
Should You Wait for Your Refund Before Getting Pre-approved?
You do not need to wait.
You can begin the pre-approval process now and create a clear plan for when the funds arrive. The money simply needs to be verified before closing.
Starting early gives you more flexibility and confidence when making an offer.
Summary
Using your tax refund toward your down payment is a smart and common strategy for many buyers. It can help you enter the market sooner and reduce financial pressure at closing.
If you are expecting a refund this year, this could be the opportunity that turns your homeownership plans into reality.
Ready to Put Your Tax Refund to Work?
If you are expecting a refund this year, let’s create a clear plan to turn it into a down payment strategy.
Every buyer’s situation is different. The right approach depends on your income, debt ratios, purchase price range, and timeline. A quick conversation can help you understand:
• How much you can qualify for
• The minimum down payment required for your target price range
• Whether it makes sense to increase your down payment or pay down debt
• What documentation you will need to avoid delays
• How to position yourself competitively for the spring market
As an independent mortgage brokerage, Ideal Mortgage works with multiple lenders to find solutions that fit your specific financial picture, not just one bank’s products.
If you are even thinking about buying this year, now is the time to run the numbers.
Book a complimentary pre-approval review today and let’s see how close you really are to homeownership.
Contact us to get started today.
