Mortgage Down Payment
If you have been or are currently a first time home buyer, one of the many questions that you will probably have is about the mortgage down payment. What is the mortgage down payment all about and how much is enough to have.
In Canada for the majority of the consumer who are looking to purchase an owner-occupied home – this means a home that you will be living in – the minimum mortgage down payment amount is 5% of the purchase price.
If you are buying a second home for your kids to live in while in school, or you would like to get that cottage property or vacation property that you have always dreamed of having, you can still put down as low as 5% as your mortgage down payment.
With any mortgage product, there is always the lending institutions own underwriting guidelines that you have to meet and be approved by, but 5% is the available minimum amount to go with.
Acceptable sources of your mortgage down payment
For the most part, if you are only providing 5% down payment for your mortgage, then there is a very high probability that you will be getting your mortgage from one of the big Canadian Banks or mortgage broker channel lenders that work with the mortgage loan insurance providers; CMHC – Canada Mortgage and Housing Corporation, Genworth, and Canada Guaranty.
Because these lenders get their mortgage insured and protected against any mortgage defaults by the client – you the consumer – they have to meet their requirements as to the source of where your down payment is coming from. We may add that even if you were to provide more than 20% down payment and no mortgage loan insurance is required, many of the banks still go by the similar guidelines of the insurers that we are about to explain.
Your mortgage down payment must come from your own resources. The funds you use for the down payment must be sitting in your own bank account, investment account, RRSP account, or any other account that is registered to you the applicant’s name for a minimum of three months.
The only time that you can get down payment from someone else is when you receive gift money from immediate family members, in which case the banks would accept it as it is not a loan.
Therefore, you cannot borrow money to put towards your down payment. If you do borrow the money from another lending institution, the bank will turn it down and ask that you prove that you have enough money in your own accounts. If you do not have the down payment or have to borrow it from someone or some institution, then you could get a lot of headaches and trouble from the bank and there is a good chance that they will decline your mortgage application.
In conclusion; if you are planning to buy your own home sometime in the near future, you should start saving up now.