Mortgage Tips: How To Get Downpayment For Your Mortgage - Hypotheque.

The down payment is a critical part of your total mortgage request. In order to access the best available rates, you should have at least a small down payment - hypotheque.

How can I obtain a down payment for my mortgage?

A down payment can arise from many sources, some very apparent and others which I have discovered through years of experience as a mortgage consultant.

There are three types of down payments - hypotheque:

1. Funds from your own holdings
2. Funds from a gift from relatives
3. Funds from other people or in another way

Making a down payment from your own funds

Funds coming from one's own holdings are the most common kind of down payment. This means that the down payment comes from the assets of the individuals who are requesting the home loan and these same individuals will be on the property title.

Personal savings: Can be made up of funds in your bank account, your investments (non-RRSP-Registered Retirement Savings Plan), and even if applicable from bank accounts of a company you own (taux hypothecaire).

RRSP If you use a HPB (Home Buyer's Plan), a government initiative founded in 1990, you can tie it to your RSSP to create a down payment for the purchase of a home. You have to understand these regulations to see if you do qualify for such a plan - pret hypothecaire.

Life insurance cash value: There are life insurance contracts that have a savings piece as a part of them that permit the policy holder to borrow against the cash value of the policy. These funds can then be used as a down payment on a home - pret hypothecaire.

Refinancing: It is possible to refinance a property that you already have to create a down payment on a new property. The down payment that comes from a refinancing is not considered a loan since you are withdrawing assets you have in your own property.

Collateral guarantee: In certain cases, you can use the equity in another property, whether or not it has a mortgage attached to it, to guarantee the purchase of another property. This is a complicated procedure that effectively creates a collateral guarantee on the other property - taux hypothecaire.

Most lenders will insist that the funds are in your possession for at least 90 days prior to depositing them as a down payment on a home. They have this requirement in order to comply with the rules the government has imposed upon them to prevent money laundering.

This all tells us that if you have saved up your money in cash, your lender will have a problem with the down payment for the purchase of property.

A gift as a down payment

A gift can be given to a home buyer and s/he can use that as the down payment on a home. The gift has to come from a relative. A spouse, parent, grandparent or child can make this gift. Even a gift from an aunt or uncle will qualify - hypotheque.

This kind of a gift has to be accompanied by a gift letter. This is a letter that explains that the money is a gift and not a loan that has to be repaid. (see this link for a blank gift letter you can use).

Most lenders will require that the gift funds are deposited into the bank account of the purchaser of the property prior to the processing of the mortgage application.

Other kinds of down payments

Besides the above methods of your own or relatives money for a down payment, there are other less well know sources for a down payment:

A gift from the bank In other words, a no down payment loan. The bank is in essence giving you a gift to use as a down payment on your mortgage. Of course, the bank takes this into account, and the rate on such a loan will be a bit higher so that the bank makes sure it's get paid back for the gift in the form of more earnings - taux hypothecaire.

Loan There are products available under CMHC programs that permit a down payment to come from a loan. This is a rare circumstance.

RRSP loan following an HBP: In this type of strategy, you can get a small down payment for your mortgage even if you do not currently have any funds in an RRSP. You have to have the RRSP loan for 90 days, after which time it is then reimbursed by the HPB. The RRSP contribution gives you a tax refund which you then use for your down payment. In order to use this strategy, you have to start the RRSP loan before February, already have the negotiations for the purchase of the home in effect, and buy the property at the end of spring, or latest, at the beginning of the summer. If you feel that this may work for you, I'd propose that you contact a RRSP loan specialist.

Sales price balance: In the last few years, there has not been a lot of use of the sales price balance as a down payment option because the market has been favorable to sellers and they do not need to offer this inducement in order to sell. It consists of the seller lending money to the buyer. The banks will generally accept a down payment that comes from a sales price balance even though it is a loan - hypotheque.

What does all of this tell us? A down payment is an extremely critical part of the home loan process. If you want to look at all of the possibilities open to you to get the funds for your down payment, we would be very happy to work with you to lay out a plan to obtain the funds for your down payment.