When it comes to down payments for purchasing a home, there are a few options available to be able to make the down payment. Mortgage requirements state that at least a 20% down payment needs to be put on the home. This down payment acts as a safe guard to the lender if the mortgage is defaulted on.
In the event the 20% down payment is not available, then mortgage insurance through CMHC would be the next step. With CMHC, a 5% down payment is only required, while the mortgage insurance protects the lender.
Gift as down payment: Lenders will allow a gift of a down payment from a family member to help secure a mortgage. However, a gift from a friend or co-worker will be considered as a loan and expected to be repaid. If you require mortgage insurance through CMHC, you can only receive the down payment gift from an immediate relative and only for a 1-4 unit property.
Home Buyer’s Program: The government allows you to withdraw from your RRSP penalty free to provide a down payment for a home providing the amount that was withdrawn is paid back into your RRSPs within 15 years.
Non-registered investments: If you have non-registered investments, you can use that for a down payment, but, be aware, there will most likely be tax implications for withdrawing the funds.
Borrowing the money: Some lenders will provide a down payment loan; however, the credit of the home buyer must be in excellent standing and not fall out of the limits of the debt ratios.
Cash back: If the bank is offering a mortgage product with a cash back option attached to it, then the cash back can be used toward the down payment.
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