The Down Payment Run-Down

MonsterMortgage.ca Mortgage Expert Kristian Harris talks about a topic that comes up during every mortgage planning discussion – The Mortgage Down Payment.

Mortgage down payments can come in a variety of sizes and from various sources. Many prospective home-owners may not fully understand each of the options available to them for securing a down payment and may not understand how each of these options works.

Here is a short summary of some alternate down payment sources:

GIFTS:

• Immediate realtives (siblings, parents, grandparents) are allowed to provide ‘gifted’ down-payments for borrowers
• Gifted funds are supposed to be non-repayable; to claim a gift as a borrower even though you intend to repay the money back would be considered ‘mis-representation’ by the lender because now the borrower has extra debt obligations over and above the initial mortgage.
• Borrowers and givers are required to attest that the gifted funds are truly a ‘gift’ and non-repayable

RRSP:

• First time home buyers can borrow up to $25,000 from their RRSP for down-payment
• Under the Home Buyers Plan – home-buyers are required to pay back this loan starting the 2nd year after your initial withdrawal
• Home buyers are required to pay back those funds over the next 15 years, with payments generally being 1/15 of your withdrawal
• You can pay more or less each year towards your withdrawal; paying less than the required amount will count as RRSP income
• Lenders won’t factor in these repayments in calculating your debt obligations

LINES OF CREDIT:

• Home-Owners may borrow from their LOCs (line of credits) and are also able to take advantage of any lender or developer incentives made available to them

If you have questions about your down payment options and what might work for your mortgage, give us a phone call at 1-877-819-3619 or leave us a contact request here.