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How Do you Acquire a Down Payment for your Mortgage –
Prêt Hypothecaire?
Author: Gregory van Duyse
When you apply for a mortgage, one of the
most important issues the bank will examine
is whether you have a down payment and how
much it is. Even a small one will have an
impact on the loan - hypotheque.
How can I obtain a down payment for my home
loan?
You can obtain a down payment in a lot of
different ways. Some are fairly standard
ones and others are ones you may not know
about, but I have learned of over the many
years I have been helping people get their
mortgages. There are basically three ways -
hypotheque:
-Your own funds
-A gift from a relative
-Funds obtained from other people or in a
different way.
Down payment from your own funds
The most usual form of down payment is funds
that the borrower himself already has and
can put down on a home. In other words, the
person who is requesting the mortgage and
who will own the property will supply the
money for the down payment himself. This can
be from various sources:
• The savings of the borrower. These funds
may come from a bank account, from
investments that are not locked in as
retirement funds, or even from a bank
account a company that you own has (taux
hypothecaire).
• RRSP Using a Home Buyer’s Plan (HPB), an
initiative of the Canadian government that
was put into effect in 1990, a home buyer
may use the RRSP to fund a down payment. You
have to know the regulations of this
initiative and understand if and how it
applies to you - pret hypothecaire.
• Life insurance cash value: There are life
insurance policies that have a savings piece
attached to them that permit the policy
holder to borrow against the cash value of
the policy. These funds can then be used as
a down payment on a home - pret hypothecaire.
• Refinancing: If a potential property buyer
already owns another piece of property, it
may be possible to refinance that property
and get additional funds from the
refinancing. These funds can then be used as
a down payment and they would not be
considered a loan since it is the borrowers
own assets being used.
• Collateral guarantee: There is a complex
method by which you can use the equity in
another property, even if it is mortgaged,
to guarantee the purchase of property. In
essence, a collateral guarantee on the other
property is thereby created - taux
hypothecaire.
The vast majority of lenders require that
the down payment be in your possession for
the prior 90 days. It is one of the methods
that they use to comply with government
regulations aimed at preventing money
laundering.
All of this says that if you have your money
in cash (under the mattress) you will risk
your lender not being comfortable with your
down payment.
A gift as a down payment
Many times a gift is given to a potential
mortgage applicant to be used as a down
payment on a home. This is okay, as long as
the gift is from a relative. That relative
can be a spouse, a parent, a grandparent, a
brother or sister, a child or even an aunt
or uncle - hypotheque.
This kind of a gift has to be accompanied by
a “gift letter”. This is a letter that
explains that the money is a gift and not a
loan that has to be repaid. (see this link
for a blank gift letter you can use).
Most lenders insist that the gift funds are
deposited into the bank account of the
purchaser of the property prior to the
processing of the loan application.
Other kinds of down payments
Besides the above methods of your own or
relatives money for a down payment, there
are other less well know ways to find a down
payment:
• A gift from the bank In other words, a no
down payment loan. The bank is in essence
giving you a gift to use as a down payment
on your mortgage. Of course, the bank takes
this into account, and the rate on such a
loan will be a bit higher so that the bank
makes sure it’s get paid back for the gift
in the form of more earnings - taux
hypothecaire.
• Loan There are products available under
CMHC programs that permit a down payment to
come from a loan. This is a rare
circumstance.
• RRSP loan following an HPB: This method
allows you to have a small down payment even
if you do not have any RRSP funds in your
assets. You only have to have a RRSP loan
for 90 days, which is in turn paid down by
the HPB. The new RRSP contribution will
yield a tax refund which can be used as a
down payment. This strategy works for those
who begin the RRSP loan before February,
have already entered into negotiations to
buy a home and who foresee buying a house at
the end of spring or the beginning of summer,
at the latest. I strongly encourage you to
contact an RRSP loan specialist.
•Sales price balance: The real estate market
has been a “seller’s market” over the last
few years, and so properties have been
selling quickly. This means that a down
payment in the form of a sales price balance
is not a necessity these days. A sales price
balance is a mechanism whereby the seller
loans funds to the buyer (to encourage the
purchase of the home). Banks generally
accept a down payment that comes from a
sales price balance. - hypotheque
What conclusions can we draw from this? You
have to treat the down payment as one of the
most critical pieces of your mortgage. If
you are unclear about how you can come up
with a down payment, we would be happy to
work with you to lay out the strategy to
find the funds for your down payment.
Article Source: http://www.articlesbase.com/mortgage-articles/how-do-you-acquire-a-down-payment-for-your-mortgage-prt-hypothecaire-133511.html
About the Author:
Gregory is an Accredited Mortgage
Professional (AMP). To get more information
on Home Loans rates - taux hypothecaire,
please visit: Hypotheque | Mortgage
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