The Down Payment

The down payment is a very important – but often overlooked – aspect of your mortgage application. Here is a primer on what you need to know.

  1. Minimum Down Payment: The minimum down payment is 5% of the purchase price. In some cases, all or part of the down payment can be a gift from an immediate family member.
  2. Borrowing The Down Payment: You can only borrow the down payment if it is secured by a home equity line of credit or a mortgage on another property. You cannot borrow your down payment from an unsecured line of credit or credit card.
  3. First Time Buyer Option: If you are a first time buyer, you can withdraw $25,000 from your RRSP without penalty for your down payment. It must be re-paid to your RRSP within 15 years.
  4. Withdrawing From Your RRSP For Non-First Time Buyers: If you are not a first time buyer, you can still withdraw funds from your RRSP for your down payment-but the funds will be deemed to taxable income on your next tax return.
  5. Confirming The Down Payment: All lenders require a clear paper trail of your down payment going back 30 to 90 days, depending on the lender. This means that you provide bank statements showing where the funds have been for the 30 to 90 days preceding the mortgage funding.
  6. Out of Country Funds: If your down payment is currently in another country, the funds will have to be deposited to a Canadian financial institution for 30 to 90 days prior to the mortgage funding.