Finding Sources for Your Down Payment

If you’re eager to buy a home but don’t fit the credit criteria for borrowing for that down payment, then finding sources of equity could be your only option. Luckily, there are a variety of options for you to consider.  

Sale from Another Property

If you’ve been fortunate enough to sell another property, this could be a good source of equity to use towards your down payment. If you do have this as an option, you will need to verify the equity obtained, along with a formal statement of any outstanding balance for any existing financing on the property in order to be approved by a lender. If your sale and purchase don’t coincide on the same date bridge financing can often be arranged.

From Another Property

If you own a property that you are keeping as an investment or rental property or perhaps a second home the equity could be a source for your down payment. With this as an option you can put a secured line of credit or refinance a new mortgage to gain access to that equity up to 80% of the value of the home.

Savings

Of course your savings can be used as a source as well. You will need to provide bank statements dating back at least three months to prove that these were accumulated funds. Any large deposits during that time must be accounted for.

Registered Retired Savings Plan

The purpose of an RRSP is to save for future use in a tax-sheltered account. So if you wish, your RRSP can be used as a source of equity. You just need to provide proof of your funds and that you are in fact the account holder. You can ask your financial institution to provide you with the documentation for this. The RRSP withdrawal is non-taxable as long as you pay it back within 15 years.

Gifted Down Payment

If you receive funds as a gift from an immediate family member, you can also use them as equity. Most lenders will require a statement or form of documented proof indicating that the funds were a gift and do not need to be repaid. In addition, you will need to provide a deposit slip proving that the funds were deposited into your account.

GIC or Mutual Fund

A Guaranteed Investment Certificate or mutual fund can be acceptable sources as well. A GIC is an investment that you can make where the initial amount invested will always be guaranteed to remain yours and never deplete. Whatever amount you invest can gain interest at either a fixed or variable rate. Mutual funds, on the other hands, consist of a variety of bonds, stocks, or other investable assets that make up your portfolio. So whether it’s a GIC or mutual fund, whatever you earn can be accessed as equity for the down payment of a home. There are always a variety of options and sources available to help you find the equity you need to finance your down payment and get one step closer to buying your dream home. The Mortgage Advisors is a fast growing brokerage with agents in Ottawa, Kingston, and throughout Eastern Ontario ready to serve you.