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My Mortgage Blog

Today I’m going to take some time to explain down payment for a new home purchase. There are three main sources of down payment for home buyers (and a small handful of alternative sources). These 3 would be your own savings, a gift from a family member, and borrowed.

The Sources


With your own savings this is money that you have accumulated over time for yourself. This can be in the form of general bank accounts, tax free savings accounts, and RRSP’s. For first time home buyers you can even withdraw from an RRSP tax free, under the stipulation that is must be paid back into the account over the following 15 years. For example, if you took out $15,000 you would be required to repay $1,000 each year until fully repaid. Nothing is stopping you from repaying it sooner though!


The second most common form is a gift. This has become increasingly popular amongst first time homeowners with rising housing prices because it can be very difficult to save enough even for the 5% down minimum. A gift must come from a family member, unfortunately a gift from your best friend is not allowed under most programs. In most cases part or all your down payment is permissible as a gift and can be a great way to get into a home sooner.


Borrowed down payments can be a little tricky but is still a common resource available. These are very common in purchasing rental properties as the interest paid on the borrowed funds becomes a tax write off. For new purchases for personal property however, you will need to provide some down payment from more traditional sources such as the ones listed previously. The most used forms of borrowed down payment are equity in another property and lines of credit from the bank.


Other sources:

·         First Time Home Buyers incentive (purchaser must still provide 5% from their own resources)

·         Low income grants

·         Equity in your current home (selling to buy)

·         Selling Assets (ex. Vehicle)

·         Divorce Settlements

·         Inheritance


How It Works


With any down payment source, there are a set of rules that people should be aware of.

·         RRSP/TFSA/Savings

o   MUST be in the account for a minimum 90 days. Proof must be provided on source of money within the 90 days (large deposits)

o   RRSP Maximum withdrawal – $35,000 for first time home buyers ($70,000 for 2 ex. married couple making their first purchase)

o   Cash under your mattress won’t cut it unfortunately, it will need to be in a bank account for a minimum 90 days

o   If you have lived with your spouse or common law partner and they own a home, you will not be able to use the RRSP withdrawal for your first home purchase

·         Gift

o   Must be accompanied by a signed gift letter (provided by the lender)

o   Occasionally proof from the bank account that it is coming from is required

o   In some situations, only part of the down payment may be provided as a gift and the rest must come from other sources

·         Borrowed Down Payment

o   You need a higher income to qualify, as your debt servicing will include the borrowed money too

o   Approval process tends to be more challenging as lenders are limited that allow borrowed down payment and there must be a reasonable explanation



There is many down payment sources available to everyone. Which is the best fit or best combination of sources coming down to having a conversation over the options available to you. Everyone is in different situations, but there’s always solutions and planning that can be done. Contact myself for free consultations on purchasing a home today, if it doesn’t work now, we can create a plan to make it work out sooner rather than later!