Down Payment Options
Available savings tools for First Time Buyer’s
Exploring Your Down Payment Options:
Making Homeownership Easier
Dreaming of owning your first home? One crucial aspect to consider is your down payment. Understanding your options and ensuring you meet documentation requirements can make the process smoother. Here’s what you need to know:
1. RRSP Home Buyers' Plan (HBP)
The Home Buyers' Plan (HBP) allows first-time homebuyers to withdraw up to $35,000 from their RRSPs (or $70,000 if purchasing with another first-time buyer) to put toward a down payment—tax-free.
🔹 This is an interest-free loan that must be repaid within 15 years.
🔹 Your RRSP funds must be in the account for at least 90 days before withdrawal.
🔹 You cannot have owned a home in the past four years to qualify.
🔹 The home must be your primary residence after purchase.
2. First Home Savings Account (FHSA)
The FHSA is a fantastic way to save for your first home while enjoying tax benefits.
🔹 Deposit up to $8,000 per year, with a lifetime contribution limit of $40,000.
🔹 Contributions are tax-deductible, just like RRSPs.
🔹 Funds can be invested in mutual funds, stocks, or bonds to help grow your savings.
🔹 Withdrawals for a home purchase are tax-free, provided they meet the eligibility criteria.
3. Gifted Down Payments
If you're receiving a gifted down payment from a family member, lenders require documentation to ensure the funds are legitimate.
🔹 A gift letter from the donor confirming the funds do not need to be repaid.
🔹 Proof that the funds have been deposited into your account before closing.
🔹 Some lenders may require the donor to provide bank statements showing the source of funds.
4. Required Documentation for Down Payments
When you're ready to make an offer on a home, be prepared to provide a 90-day transaction history for all accounts used toward the down payment.
Lenders will need:
✅ Full, unaltered bank statements displaying the account holder’s name.
✅ Documentation for any large deposits that are not from regular income.
✅ A clear paper trail for any large transfers, including statements from other accounts if applicable.
These requirements are part of strict anti-money laundering regulations, ensuring transparency in financial transactions.
These options can make your homeownership journey more accessible and manageable. Remember, every situation is unique so feel free to reach out if you have any questions or if you’re ready to explore these down payment avenues further. We’re here to guide you toward your homeownership goals.
