Mortgage Down Payment

Sources

There are several down payment options available for Mortgagors. Down payment funds from your own resources such as savings are considered the best source however lenders do allow alternative sources subject to the mortgage products guidelines. Personal Savings You may use available cash funds for the down payment on a property as long as you can prove where the funds came from. Due to anti- fraud regulations lenders will generally require proof of the funds being available in your account by the means of three months of bank statements. Any large deposit sources may have to be verified.    Registered Retirement Savings Plan (RRSPs) The Government’s Home Buyers’ Plan (HBP) allows each first-time home buyer to withdraw up to $25,000 from their unlocked RRSP account for the purchase of their first home. To qualify under the HBP as a first-time home buyer certain conditions will apply. You may use your RRSP withdraw any way you wish as long as you are committed to the purchase of an owner occupied home. If you are not a first-time home buyer you may withdraw funds from your unlocked RRSP however they will be taxed upon withdrawal. Gifted Down Payments A gifted down payment from an immediate family member is considered your own resources. A gift from a non-immediate family member, friend or employer may be allowed depending on your down payment amount. The gifted funds will need to be deposited into your bank account prior to closing and be accompanied by a gift letter stating that the funds are unencumbered and require no re-payment. Borrowed Down Payments Some Lenders will allow borrowed down payments for the purchase of property as long as the applicants credit is excellent and the repayment of the borrowed funds are included in the debt ratios in the application. No Money Down Payments In October 2012 new regulations came into affect for Banks in Canada which is now regulated by the Office of the Superintendent of Financial Institutions of Canada (OSFI) which now does not allow Banks in Canada to consider bank cash backs as a down payment for a home. However, there may be other ways to structure your down payment from other borrowed funds.  Existing Home Equity You may access existing equity in a property for a down payment on a new property. Proof of ownership and the mortgage statements on the existing property are required to verify the available equity in the property. Net Proceeds from the Sale of Property The proceeds from the unconditional sale of property is an acceptable form of down payment. Copies of the sales contract, current mortgage statement and sales commission amounts are required to determine the net proceeds amount for down payment.