Acceptable Sources of Down Payments

A Down Payment may come from a variety of sources, including:

1.      Savings

2.      Home equity

3.      A gift from an immediate family member

4.      RRSPs

The first source, savings, is pretty straight-forward.  The bank* may want to see a history of your savings to ensure that the money you are using for your down payment is coming from your own resources (earnings) and that you will not have to pay anyone back.  This can usually be proven through bank statements.

I wrote about home equity earlier, so you should be familiar with the term.  If you are transferring your mortgage or refinancing, you can use the equity in your home as a down payment.

A gifted down payment must come from an immediate family member.  The bank will want to see a signed agreement between you and the family member stating that the family member is giving you the money and he/she does not expect you to pay him/her back.  The gift letter should also include the full name, contact information and relationship of the donor. 

*A note/disclaimer: I realize that I have been using the term “the bank” quite often in my writing and this may seem misleading to some.  To clarify, when I say “the bank”, I actually mean this to represent any number of lenders.  These lenders could be banks, credit unions, mortgage investment companies, private lenders, etc.  In my day-to-day dealings, I have noticed that most people just refer to lenders as “the bank”, since this term is used so often in our daily conversations and since “the bank” was where people traditionally used to get their mortgages in the past.  I will continue to use the term “the bank” in this blog for ease of explanation.