There is so much misinformation out there in the market place to day around the down payment requirements when you purchase a new home so lets have a virtual discussion around the topic.
No, I cannot magically create or make it look like you have a down payment when you dont, that is called mortgage fraud and I could lose my license if I did such a thing.
No, you do not require 10% down if this is your second or third or forth home purchase.
No, banks will not provide you with a cash back incentive and allow you to use it as the down payment, that program died a while ago when new rules were brought down by the federal government.
No, the seller of the house can not gift you or lend you the down payment however if the seller is immediate family they may be able to gift you 5% equity.
No, you can not borrow the money from a friend.
So what can you use for a down payment and how much do you need?
If you are looking to buy an owner occupied home that is 1 or 2 units then you only need 5% down unless the lender feels the deal is too weak and more of a down payment could mitigate the weakness in the application. That 5% down can come from various places such as your personal savings, your Registered Retirement Plan, the sale of an asset, a non repayable gift from an immediate family member or you could borrow it from your line of credit, or credit card. Lenders are under very strict guidelines when it comes to providing a paper trail of this money and this is due to the Anti Money Laundering and Terrorist Financing Act so be prepared to answer a lot of questions and provide a lot of paper.
When you are getting a gift from immediate family that person or persons will be required to sign a gift letter stating that the gift is non repayable and who do lenders deem to be immediate family? Well it can be parents, grandparents, and siblings, that is it. Aunts, uncles, girlfriends, in laws, cousins, spouse, these people do not fall under the immediate family guidelines and while some lenders will grant an exception it is not a guarantee that they will allow these people to gift you the down payment.
So when it comes to the strength of the down payment lenders give more points to the application if the source of funds is coming from your savings, RRSP or sale of an existing asset, fewer points are given if it is a gift and not many points given at all if you are looking to borrow your down payments. If you are starting a new job, have weak credit and are currently carrying quite a bit of debt the likely of you getting approved for a mortgage with a borrowed down payment is slim to nil. Lenders really like to see that your savings habits have been established and that you have the discipline to budget, manage your revolving credit well and save money. Please call me if you would like to discuss your individual situation because everybody has a different story and there are exceptions to every rule.
Weakness in Toronto and Vancouver after seasonal adjustment
In August the TeranetNational Bank National Composite House Price IndexTM was up 0.2% from the previous month. Removing normal seasonal patterns (seasonal adjustment), the index would have been virtually flat, following retreats in June and July. In other words, after seasonal adjustment, the downtrend of June and July did not turn around in August.
Individual market indexes were up in eight of the 11 metropolitan markets surveyed. Seasonally adjusted, they would have been up in only four. The published (non-seasonally-adjusted) indexes were up strongly under any respect in Ottawa-Gatineau (1.4%), Hamilton (1.4%), Montreal (1.2%) and Quebec City (0.5%). However, gains in Toronto (0.3%), Edmonton (0.2%), Victoria (0.1%) and Winnipeg (0.1%) only reflected usual seasonal pressures. After seasonal adjustment, these indexes would have dropped or be flat. Indexes were down for Halifax (0.6%), Calgary (0.3%) and Vancouver (0.4%).
The published Toronto index was up for a fifth straight month. But it is the opposite after seasonal adjustment as the index would then have been down for a fifth straight month. For Vancouver and Victoria it was a third straight month of decline after seasonal adjustment.
In August the composite index was up 1.4% from a year earlier, the smallest 12-month rise since November 2009. This weakness is partly attributable to a peak in August 2017 from which the index declined in following months. For this reason the 12-month rise is likely to accelerate in the months ahead. August 2018 indexes were down from a year earlier in Toronto (3.3%), Hamilton (0.7%), Calgary (0.5%) and Edmonton (0.3%). They were up from a year earlier in Winnipeg (1.3%), Quebec City (1.4%), Halifax (4.6%), Montreal (4.8%), Victoria (5.0%), Ottawa-Gatineau (5.2%) and Vancouver (7.6%).
Besides the Toronto and Hamilton indexes included in the composite index, indexes exist for the seven other urban areas of the Golden Horseshoe. In July, two of these, Barrie and Oshawa, were, like Toronto and Hamilton, below their peaks of Q3 2017. Indexes not included in the composite index also exist for seven markets outside the Golden Horseshoe, five of them in Ontario and two in B.C. The 12-month rise of these indexes varied widely, from 1.5% for Sudbury to 14.3% for Abbotsford-Mission.
 Note on methodology: The current-month data used to calculate the index are those of closed sales entered in the provincial land registry. To illustrate the home price trend, the published indexes of the 11 metropolitan markets entering into the TeranetNational Bank Composite House Price Index present moving averages of the last three months of raw indexes, a procedure that evens out month-to-month fluctuations. For our full methodology, please visit www.housepriceindex.ca
Bank of Canada maintains overnight rate target at 1 ½ per cent
The Bank of Canada today maintained its target for the overnight rate at 1 per cent. The Bank Rate is correspondingly 1 per cent and the deposit rate is 1 per cent.
CPI inflation moved up to 3 per cent in July. This was higher than expected, in large part because of a jump in the airfare component of the consumer price index. The Bank expects CPI inflation to move back towards 2 per cent in early 2019, as the effects of past increases in gasoline prices dissipate. The Banks core measures of inflation remain firmly around 2 per cent, consistent with an economy that has been operating near capacity for some time. Wage growth remains moderate.
Recent data on the global economy have been consistent with the Banks July Monetary Policy Report (MPR) projections. The US economy is particularly robust, with strong consumer spending and business investment. Elevated trade tensions remain a key risk to the global outlook and are pulling some commodity prices lower. Meanwhile, financial stresses have intensified in certain emerging market economies, but with limited spillovers to other countries.
The Canadian economy is evolving closely in line with the Banks July projection for growth to average near potential. Following growth of 1.4 per cent in the first quarter, GDP rebounded by 2.9 per cent in the second quarter, as the Bank had forecast. GDP growth is expected to slow temporarily in the third quarter, mainly because of further fluctuations in energy production and exports.
While uncertainty about trade policies continues to weigh on businesses, the rotation of demand towards business investment and exports is proceeding. Despite choppiness in the data, both business investment and exports have been growing solidly for several quarters. Meanwhile, activity in the housing market is beginning to stabilize as households adjust to higher interest rates and changes in housing policies. Continuing gains in employment and labour income are helping to support consumption. As past interest rate increases work their way through the economy, credit growth has moderated and the household debt-to-income ratio is beginning to edge down.
Recent data reinforce Governing Councils assessment that higher interest rates will be warranted to achieve the inflation target. We will continue to take a gradual approach, guided by incoming data. In particular, the Bank continues to gauge the economys reaction to higher interest rates. The Bank is also monitoring closely the course of NAFTA negotiations and other trade policy developments, and their impact on the inflation outlook.
The next scheduled date for announcing the overnight rate target is October 24, 2018. The next full update of the Banks outlook for the economy and inflation, including risks to the projection, will be published in the MPR at the same time.