Where Can Your
Down Payment Come From?

There is no doubt that sourcing a down payment is the worst part of first-time home buying. So let’s make a cheat guide for prospective buyers to feel a little better about where that money can come from.

• Finding your down payment is really your first big step in the home-buying journey – and it is also by far the scariest. 

• But the good news is that the cash can come from a number of sources – not just your saved-up babysitting earnings.

• Most buys use primarily savings or investments, but there’s flexibility. 

• Cash gifts from family are increasingly common, of course. Parents can also transfer home equity if you’re buying their place, giving you a financial head start. 

• But remember that cash gifts have to come from an immediate family member, and your lender will require a gift letter as well as a paper trail of where the funds are coming from.

• Then, it was only earlier this spring that the feds announced a huge increase to its Home Buyers’ Plan which allows first time buyers to borrow their RRSPs tax-free to fund a down payment.

• Previously, the maximum was $35,000 per borrower (up to $70k per household) but under the new limits, each borrower can use up to $60k for a total of $120k for the household!

• You will have to repay these borrowed funds or be subject to taxation, but you have 5 years before repayments begin and 15 years after that to pay it back!

• But how much do you actually need?

• Homes under $500,000 need at least 5% down. Over that, up to $1 million, it’s 10% on the excess. Splurging over a million? That’s a 20% minimum.

• Going over 20% down has its perks—no default insurance needed and potentially better mortgage conditions. But the timeline of saving that much cash could potentially keep you out of the market for a very, very long time,

• No matter where your cash is coming from, all down payment funds need a clear history - 90 days minimum. 

• Why? It’s all about transparency, ensuring everything’s above board as per the Anti-Money Laundering Act.

• Think of your down payment as more than just an upfront cost—it’s a strategic move that influences your mortgage’s size and shape, affecting how quickly you can claim full ownership.

• Let’s chat about your down payment strategy now – even if you are a year or more away from that first purchase. The more time you have to plan, the better!