Mortgage Tips- Capital

One of the key criteria for qualifying for any mortgage, is the capital or downpayment you can bring to the deal. In most circumstances, you need to be able to come up with at least 5% of the purchase price. I say 'in most circumstances' because there are some lenders who will loan close to 100% of the funds needed. As you can well imagine however, this unique flexibility is offered at higher risk to the lender. The resultant interest rates are therefore higher.
There are situations where you may be able to put down more than 5%. The more you put down of course, the less of a mortgage you have to pay interest on. A big savings can happen when you can put 10& or 15% down, as the CMHC insurance premium fees go down every time you reach another multiple of 5%.
For example, on a $200,000.00 home, if you put 5% down or $10,000, your CMHC fee will be $7125.00. If you put down 10% or $20,000.00 however, your CMHC fee drops to $4500.00 - a savings of $2625.00! It may be worthwhile therefore to take extra downpayment out of your RRSPs in order to save on the CMHC fees. To qualify to use RRSP money, you must not have owned a house for the previous four years.
Down payments can be cash on hand or gifted to you. Either way, the lender wants to verify you have not gone into more debt somewhere else to get it. The lenders will ask for proof that the downpayment funds are not borrowed. Here are some of the ways they will seek to verify the source of the down payment.
If the cash is coming from your own resources they will want to see bank statements with your name, address, and date on them, to show that the money has been accumulating over a period of time.
If the money is coming from RRSPs, the lenders will want to see dated proof of that transaction.
If the money is gifted to you, they will want to see a gift letter stating who the gift is from, who the gift is for, and, stating the monies are not re-payable. Some lenders will then want to see that money seeded into your account for a number of weeks as well.