In hot real estate markets like Vancouver, first time buyers may find it difficult to come up with enough of a down payment to buy a home. However, sometimes buyers can be lucky enough to have family able and willing to “gift” them some money to assist with their down payment for their home purchase.
What is a “gifted” down payment?
A gifted down payment is essentially what it sounds like – a monetary gift that is put towards a down payment. A gift can be used to help a buyer make the minimum 5% payment, or it can be used to put down enough (20%) to avoid the mortgage from being high-ratio, so that the buyer does not have to pay an insurance premium.
What documentation is required?
If you are using gifted money for a down payment, you and the person(s) gifting you the money will need to sign a gift letter, and possibly provide evidence that the giver has the funds. The borrower will also have to show that the funds have been deposited into their account.
What else do you need to know?
Gifted down payments can only come from immediate family members. They are also strictly gifts. It is important that family members giving money and buyers receiving money have a complete understanding that the funds being gifted are NOT a loan, and there should be no expectation that the funds be repaid to the giver.
A mortgage broker can help you decide what is best for your situation, and can walk you through the steps to prepare your mortgage application.
Call me today to discuss how I can help you get the best mortgage package for you!