It is important to understand that lenders are required to verify the source of funds being used for a mortgage down payment under provincial and federal laws. Lenders are very specific as to the allowable sources for the down payment and how long the money has to be in an account. The following are general guidelines that you can use to assist you with your financial planning.
Bank Accounts: A 90 day history is required of the account in which your down payment is on deposit. If the down payment is held in multiple accounts (Savings/Chequing/TFSA) you will need a history for each account. If you print a computer generated statement that only shows the account number a second piece of documentation will be required such as a statement or void cheque that links the account number to the account holder. Any unusual large deposits will need to be explained.
RRSPs: If you are withdrawing RRSPs for your down payment under the Home Buyers Plan, these funds must be in the account for at least 90 days to avoid withholding tax when you cash them in.
Payments in Advance: Payments in advance such as deposits with the offer and advances to builders on new construction are considered to be part of the down payment. For example, if you require a total of $25,000 as a down payment and you have given $5,000 as a deposit the balance of your down payment is $20,000.
Gifted: You may receive a non-repayable gift from a direct family member such as a mother, father, grandparent, or sibling. Most lenders have their own gift letter which must be signed by you and the person who is gifting the funds. The gift money does not have to be in your account prior to an accepted offer. The gifted amount must match the amount that is deposited to the account.
Sale of a Property: If the sale was recently completed the lender may require a copy of the Statement of Adjustments from your lawyer. If the sale is pending, the lender will require a copy of the signed Offer to Purchase and a current copy of title and mortgage statement if applicable. Other documentation may be required.
Sale of an Asset: If you are selling an asset or a vehicle the bill of sale, copy of your old registration and a proof of deposit will be required.
Inheritance: The legal documentation and proof of deposit is required.
Divorce Settlement: A copy of the divorce papers and confirmation of the deposit or proof that the money is in a legal trust.
Of Prime Interest is a collaboration of mortgage professionals; Trish Balaberde 250-470-8324, Darwyn Sloat 250-718-4117, Christine Hawkins 250-826-2001.