The amount of down payment or equity required depends on the specific deal. Generally, if you are refinancing, you can apply for up to 80% of the appraised value. If you are purchasing a personal home or a duplex that you are going to live in, you can apply for a mortgage of up to 95% of the purchase price (5% down payment). Triplex and fourplex properties (in which you will live in), requires at least 10% of the purchase price for the down payment. A property with more than four units is typically considered a Commercial property. If you have questions about Commercial properties, please feel free to contact me directly.
When refinancing a property, lenders will usually ask for an appraisal to establish the current market value. If the requested mortgage amount is small, the MPAC evaluation can sometimes be used instead of an appraisal. The lender will order the appraisal themselves or have the Mortgage Broker order it. You will need to pay for this report and any legal costs involved in refinancing your mortgage.
When purchasing a property, lenders require 3 months Bank Statements showing the name of the borrower, the transactions and the balance to prove the down payment and closing costs are available and not obtained through illegal means. The lender will want document proof of the source of any large deposits (usually anything over $1,500) that are not from a paycheque.
As a first-time home buyer, the government allows you to use a large amount of your RRSPs without penalty for your down payment. You have 15 years to pay them back or claim 1/15 as income each year on your personal taxes. RRSPs must have been invested for at least 90 days before they can be used to purchase a home.
You are also allowed to have all or some of your down payment gifted to you. The gift must be from a direct relative (grandparent, parent, sibling, child). A gift letter is signed by both parties at the time a mortgage is being applied for. A bank statement showing the funds deposited into the purchaser’s account is required at least 15 days before closing date.
Closing costs must also be available. Keep in mind that when you purchase a property, in addition to proving you have a down payment, you will also need to show the Lender that you have enough to pay for the closing costs as well. Typically, closing costs will be around 1.5% of the purchase price but often they can add up to even more. A quick phone call to a lawyer is always a good idea to find out what your closing costs may total.
Jenni MacDonald (www.jmacdonald.ca)is a Mortgage Broker with Dominion Lending Centres The Mortgage Source (Lic.#10145). She has over 7 years of experience in the Mortgage Industry and works with at least 40 lenders including banks, credit unions, and private lenders to find the
best mortgage for each client. You can contact her by phone or text at 613-551-0639 or via email at [email protected]