You have a few
When it comes to your mortgage down payment options there are a few things to uncover before you take the next step. Knowing the amount of down payment you have available determines how your application looks.
For an owner occupied property the minimum down payment is 5%. This can come from one or a combination of down payment options. The amount of down payment you have available will determine your interest rate, whether mortgage default insurance is applied, and the amortization period.
What are your Down Payment Options?
Lenders love it when your down payment comes from your own resources. This includes personal savings accounts, Tax Free Savings Account (TFSA), or other investments. Ninety (90) day history on down payment funds is required. This is supported by providing a statement or snapshot of your online account for the 90 day period. Your name and account number should be visible. If you have any large deposits (that are not clearly explained) we’ll be required to provide details.
RRSP
If are planning on using Registered Retirement Saving Plan (RRSP) for down payment, The Home Buyers Plan (HBP) a program that gives you the ability to pay back the funds within a 15 year period. The maximum RRSP amount that can be withdrawn for a down payment is $35,000. There are conditions that must be met to participate in the HBP as detailed here. Lenders request documentation showing the RRSPs are in your name, cashable and funds have been in your account for the past 90 days.
Gifted down payment
A gift, from an immediate family member, money that you are not obligated to pay back. Lenders require a gift letter be signed outlining the gift amount, the giftor’s relationship to you, property details and contact information. The lender will also want to see verification the funds have been deposited into your account. Lenders may want to see a portion of down payment coming from your own funds, or a fallback option (which might include your investments/current assets), depending on your repayment history identified on your credit bureau.
Borrowed down payment
Borrowed down payment may be considered if your credit history is excellent. Your employment history would come into play as well as meeting the Total Debt Service (TDS) calculations.
In Summary
The amount of down payment you have access to determines if, and how much mortgage default insurance may be added to your mortgage. For more details on mortgage default insurance visit this link.
It is great we have a few down payment options available to reach our goals. Which are best for you?
The adventure is out there. You’ll know when the time is right!
