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My Mortgage Blog

The question of down payment is one that comes up often when considering mortgage options. Your down payment starts at 5% and can be more, depending on your available funds or specific situation.

Savings

Your down payment can come from your own resources, such as a savings account, tax free savings account or an investment. Be prepared to provide three month's history on that account, to demonstrate how the funds were acquired. However, a down payment can also be from a sudden account deposit source that is verifiable, such as a tax refund or the sale of an existing home.

Gift

A family member, such as a parent or grand-parent, may make a gift to you for a down payment and would need to sign a form stating the funds are a gift (not a loan), and the family member's bank may have to sign the form verifying they are not taking out a loan themselves to pay for the gift. 

Borrowed Down Payment 

Some mortgages allow a borrowed down payment from another source, such as a line of credit, however the loan payment will be included in the calculation of your monthly budget along with the mortgage payment. This may work in situations where both the loan and mortgage payments are affordable. 

Cash Back Mortgages

Some mortgages offer a cash back option, which you can use to pay back the borrowed down payment. However, these mortgages are at a higher interest rate and if the mortgage is paid out early, you may have to repay the cashback received. Most often clients are interested in securing the lowest mortgage rate available to them for their situation, so the higher interest rate for cash back mortgages may not be the solution - however for the right situation it could be an option. 

Since mortgages are very specific to the individual, situation, past credit, income and lender, be sure to speak with a mortgage professional who can guide you through the process and present the options that are going to be a good fit for you.