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Mark Herman – Calgary Mortgage Broker

Acceptable Sources of Down Payment for a home Canada, 2024

February 13, 2024 Calgary mortgage

This seems to be the topic of this week  … what can I use for down payment on my home?

All banks DO ACCEPT these approved methods to gather down payment for a home.

Acceptable Sources of Down Payment:

  • Investments
  • Legal Settlements
  • RRSP
  • Borrowed funds from secured facilities
  • RESP
  • Income tax refunds
  • Sale of a property
  • Cash Buyout from separation or divorce
  • Refinance of a property
  • Employer relocation allowance
  • Land – sale of – including from divorce
  • Business cash flow
  • Inheritance
  • Business proceeds from sale
  • Grant “Insured Only”
  • Winnings
  • Personal savings “Tax-Free Savings Account (TFSA) or Tax-Free First Home Savings Account (FHSA)”
  • Gifted funds “Only from an immediate family member (siblings, child, parents, grandparent), the spouse and the ex-spouse”
  • Gifted equity “Only from an immediate family member (siblings, child, parents, grandparent), the spouse and the ex-spouse”
  • Funds wired from abroad except from sanctioned countries
  • First Time Home Buyer Incentives (FTHBI) program

Ineligible Sources of Down Payment

  • Unsecured loans, lines of credit and credit cards
  • Lease to own / Rent to own – because this happens to be the #1 area of fraud in ALL if Canada for ALL reasons.
  • Sweat equity
  • Cash back
  • Purchase incentive
  • Locked-in RRSP
  • Cryptocurrency – even Dogecoin – sorry Elon. 🙁
  • Vendor concession- or Vendor Take Back = VTB  (treated as a decrease in the purchase price)

The new Tax-Free First Home Savings Account (FHSA) and the

FTHBI – First Time Home Buyer Incentive were the government matches your down payment up to 5% ARE both great ideas!

Mortgage Mark Herman, top Calgary Alberta Mortgage Broker since 2004!

Using Business Income / Corporate Income to Qualify for a Mortgage in Canada, 2024

February 6, 2024 Mortgage Rules

Are you self- employed and thinking about, or hopping to use your own business income or corporate income to help you qualify for a mortgage?

It is possible, but not very common, as it usually does not help as much as we hope it would.

Mortgage Mark Herman, best Calgary Alberta mortgage broker for self-employed buyers

 

For RESIDENTIAL Purposes:

Very few lenders (like 3 out of 40+) will consider using business income that is not on personal taxes.

  • When they will allow the business income added in, they only use between 40-60% of the net business income after dividends paid.
  • They wouldn’t allow the operating company to actually be on mortgage/title;
    • it would be in personal name or
    • Hold Co name (with full personal guarantee, for the full mortgage amount – with full recourse. Meaning they can/ do/ will sue you into bankruptcy if they need to foreclose.)

Docs Needed

They do need to review more data than usual if trying to use business financials. I addition to the regular documents needed (2 years of T1 Generals, and NOAs and T4’s if there is T4 income), add in these docs:

For the Business:

  • 2 years of professional accountant prepared financial statements
    • including a signed ‘Notice to Reader’ and
  • Need a compilation of all billing engagements for the fiscal periods

 

Catch – there are always a few:

If the property in question has a large shop – it is usually not allowed in determining the value so a higher mortgage amount is usually required.

They also have a hard time if there is any income to be derived from the property.

 

Acreage Details

Max land is limited to 4, 8, or 10 acres – depending on lender

  • Only the home, de/attached garage and 4 acres are used for valuation by lender.
  • NO value is attributed to: out-buildings, sheds, riding rings, stables, storage, nor fences
    • Many of which could be valued at 200k+, like fences and buildings.