Very few home buyers have the cash available to buy a home outright, most will need to borrow money in the form of a mortgage. You must have a down payment (or equity) that is a portion of the purchase price that you provide from your own financial resources to even qualify for a mortgage. Many people struggle with saving for a down payment and it still remains the single biggest obstacle to home ownership.

To qualify for a conventional mortgage, you generally need a down payment of 20% or more.

We can help you understand what type of equity do you have to put towards your down payment. We start by adding up the savings/investments that you have available – chequing and savings accounts, GIC’s, term deposits, stocks, bonds, mutual funds, and gifts from relatives.

Here are three ways that can help you achieve that down payment goal:

1. Home Buyers’ Plan – RRSP’s

The federal Home Buyers’ Plan (HBP) is a program that allows you to withdraw up to $25,000 from your registered retirement savings plans (RRSP’s) to buy or build a qualifying home for yourself. You do not have to include eligible withdrawals in your income, and your RRSP issuer will not withhold tax on these amounts (i.e. no tax implications). You can withdraw a single amount or make a series of withdrawals throughout the same year, provided the total of your withdrawals is not more than $25,000. If you buy a qualifying home together with your spouse or other individuals, each of you can withdraw up to $25,000.

You have to repay all withdrawals to your RRSP’s within a period of no more than 15 years. Generally, you will have to repay an amount to your RRSP each year until you have repaid all of the amount you withdrew. If you do not repay the amount due for a year, it will be included in your income for the year.

To find out how if you qualify or how to make a withdrawal click this link: Home Buyer’s Plan

cash gift mortgage 2.Gifted Down Payment

This is acceptable as long as the money is from an immediate family member of the borrower. The money must be a genuine gift and does not ever have to be repaid, and in the borrower’s possession no later than 15 days prior to the closing date. No part of the gift can be provided by any third party having any interest (direct or indirect) in the sale of the subject property. Written confirmation signed by both the borrower and donor will be used to verify the authenticity of the gift.

3.Cash Savings

You must have a 90 day history of all savings and/or chequing that shows a gradual savings. Any large deposits ($5K and over) will also require a paper trail.

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