To secure your mortgage, the source of your down payment, plus an additional 1-1.5% for closing costs (including lawyer fees, inspection, appraisal, and property tax adjustment), must be substantiated.
Down Payment Minimums:
- Minimum down payment for owner-occupied property with CMHC loan insurance: 5%
- Minimum down payment for owner-occupied property without CMHC loan insurance: 20%
- Minimum down payment for rental property: 20%
- 50% down payment for vacant land
- 35-40% down payment for a seasonal property (3 Season)
- 0 down mortgage: Traditional zero down mortgage options from banks do not exist. However, you can create a no down payment mortgage by borrowing from alternative sources like a line of credit or personal loan
Sources of Down Payment
- Accumulated Savings:
- Last 90 days of applicable savings and checking bank account statements reflecting the applicant's name and account number.
- Clarify any significant deposits and provide the history of each account holding the funds.
- RRSP/TFSA/Investment Accounts:
- Last 90 days of account statements displaying the applicant's name and account number.
- RRSP amounts must be at least 90 days old to avoid tax withholding.
- Gift:
- Gift letter signed by all involved parties.
- Copy of the actual cheque.
- Proof of deposit.
- Sale of Property:
- Copy of the signed Offer to Purchase.
- Mortgage Lender's 2year-end statement (or a more recent online version).
- Current copy of the property title (maximum 30 days old).
- Divorce Settlement:
- Copy of divorce papers.
- Proof of deposit OR lawyer’s confirmation of money held in trust.
- Inheritance Amount:
- Legal documentation.
- Proof of deposit.
- Sale of Vehicle or other Asset:
- Bill of Sale.
- Copy of the old registration.
- Proof of deposit.
- NO "Mattress Funds":
- Unexplained cash must be deposited and aged for 90 days to comply with the Money Laundering Act.
- Existing Equity in Different Property via HELOC:
- Provide title and mortgage details.
- Borrowed money via Line of Credit or Personal Loan:
- Furnish loan or Line of Credit details.
- Cash Incentives:
- Any cash incentives must be disclosed.
Buyers are prohibited from borrowing or receiving funds from parties related to the subject property sale, and vendors cannot provide incentives to buyers, except for improvements that enhance the property's value, like a new roof. (Purchase Plus Improvement Loan)
It is crucial to note that lenders are obligated to trace the source of all down payment funds under the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations. While money does not need to be in your account for 90 days, any deposits within 90 days of the purchase must be clearly supported as to their source.