Gifted down payment are funds given to a mortgage applicant by an immediate family member to be used to qualify for a mortgage or simply to lower the mortgage amount. It is a very common and popular mechanism used by parents or siblings to support their family members financially without expecting the support being paid back
If you are planning to buy a home using a gifted down payment, you need to understand who can this Gifted down payment may come from, and, what are the mechanisms to be followed for it to be accepted.
The Government of Canada recently announced the minimum down payment requirement will be increased from 5% to 10% on the portion of a purchase price for a property that is above $500,000 but less than $1 million on insured mortgages. This change will take effect on February 15, 2016.
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Who can offer a Gifted down payment?
Immediate family members (i.e. parent, grandparent or sibling). Gifts from spouses are not acceptable.
How can a Gifted down payment be used?
A Gifted down payment can be used provided that the funds are properly verified, are non-repayable and all other characteristics of the borrower are acceptable. In most cases Gifted down payment is required to be on the applicants’ account 15 days until the time of closing.
A letter must contain the following information
The amount of the gift
A statement that the gift is non-repayable and is from non-borrowed funds
The full names of the mortgagor and Giftor (s),
The relationship between the mortgagor and the giftor(s) and
The reason for the gift.
The deposit or cheque confirming the funds have been received must be obtained.
Acceptance of Gifted down payment is subject to verification
The non owner occupied rental mortgage loans help you qualify by adding the monthly rental income to your current income. As a result you are able to purchase or refinance a rented property and let the property pay for itself with the rent
Scenario: You currently have a steady job or business, a decent credit score, some savings but no time to start another business or job, and you would like to earn residual income from a real estate property.
The non-owner occupied rental mortgage is designed for those who would like to become real estate investors.