Options For Your Downpayment

Rabinder Dhillon • August 27, 2025

Your downpayment refers to the initial payment you make when buying a property through mortgage financing. A downpayment is always required when purchasing, because in Canada, lenders are only allowed to lend up to 95% of the property value, leaving you with the need to come up with at least 5% for a downpayment.


In fact, securing mortgage financing with anything less than 20% down is only made possible through mortgage default insurance. Canada has three default insurance providers: the Canadian Mortgage and Housing Corporation (CMHC), Sagen (formerly Genworth Canada), and Canada Guaranty. There is a cost for default insurance which is usually rolled into the total mortgage amount and is tiered depending on how much you put down.


As your downpayment can be a significant amount of money, you probably need a plan to put this money together. So, let’s take a look at some of the options you have to come up with a downpayment.


Money from your resources


If you’ve been saving money and have accumulated the funds and set them aside for to use for your downpayment, you'll need to prove a 90-day history of those funds. As far as the lender is concerned, this is the most straightforward way to prove a downpayment.


Any large deposits to your bank account that aren’t from payroll will require you to prove the source of funds. For example, if you recently sold a vehicle, you’ll need to provide the paperwork as proof of ownership, which corresponds to your account’s deposit. Or, if you have funds in an investment account that you’ve transferred over, statements of that transfer or account would suffice.


You have to prove the source of your downpayment funds to the lender when qualifying for a mortgage to help prevent money laundering.


Funds from the sale of another property


If you’ve recently sold a property and you’re using the proceeds of that sale as the downpayment from your new purchase, you can provide the paperwork from that transaction to substantiate your downpayment.


RRSPs through the Home Buyer’s Plan


Okay, so let’s say you don’t have all the money set aside in your savings, but you do have cash in your RRSP. Assuming you’re a first-time homebuyer, you can access the funds from your RRSP Tax-Free to use as a downpayment.


You’re able to access up to $35k individually or $70k as a couple. The money has to be paid back over the next 15 years. If you’d like more information on what this program looks like, please get in touch.


Gifted downpayment


Now, if you don’t have enough money in your savings, but you have a family member who is willing to help, they can gift you funds for your downpayment. With the increased cost of living, making it harder to save for a downpayment, receiving a gift from a family member is becoming increasingly commonplace.


Now, to qualify, the gift has to come from an immediate family member who will sign a gift letter indicating there is no schedule of repayment and that the gift doesn’t have to be repaid. Proof that the money has been deposited into your account is required through bank statements.


Gifted funds can make up part of or the entire amount of downpayment. For example, if you purchase a property for $300k and have $10k saved up, your parents can gift you the remaining $5k to make up the total 5% downpayment.


Borrowed downpayment


Suppose you aren’t fortunate enough to have a family member who can gift you a downpayment, but you have excellent credit and a high income compared to the amount you’re looking to borrow. In that case, you might qualify to borrow part or all of your downpayment.


It’s possible to borrow your downpayment as long as you include the payments in your debt service ratios. Typically this is 3% of the outstanding balance.


So there you have it, to qualify for a mortgage, you’ll need to come up with a downpayment. That can be through your resources, a property you sold, an RRSP, a gift from a family member, borrowed funds, or a combination of all five sources.


If you’d like to discuss your downpayment or anything else related to mortgage financing; it’s never too early to start the conversation about getting pre-approved for a mortgage. Please connect anytime. It would be a pleasure to work with you!


RABINDER
MORTGAGE BROKER

LET'S CONNECT

Home Reno Dreams? Let’s Talk Mortgage Financing

By Rabinder Dhillon • December 3, 2025
How to Use Your Mortgage to Finance Home Renovations Home renovations can be exciting—but they can also be expensive. Whether you're upgrading your kitchen, finishing the basement, or tackling a much-needed repair, the cost of materials and labour adds up quickly. If you don’t have all the cash on hand, don’t worry. There are smart ways to use mortgage financing to fund your renovation plans without derailing your financial stability. Here are three mortgage-related strategies that can help: 1. Refinancing Your Mortgage If you're already a homeowner, one of the most straightforward ways to access funds for renovations is through a mortgage refinance. This involves breaking your current mortgage and replacing it with a new one that includes the amount you need for your renovations. Key benefits: You can access up to 80% of your home’s appraised value , assuming you qualify. It may be possible to lower your interest rate or reduce your monthly payments. Timing tip: If your mortgage is up for renewal soon, refinancing at that time can help you avoid prepayment penalties. Even mid-term refinancing could make financial sense, depending on your existing rate and your renovation goals. 2. Home Equity Line of Credit (HELOC) If you have significant equity in your home, a Home Equity Line of Credit (HELOC) can offer flexible funding for renovations. A HELOC is a revolving credit line secured against your home, typically at a lower interest rate than unsecured borrowing. Why consider a HELOC? You only pay interest on the amount you use. You can access funds as needed, which is ideal for staged or ongoing renovations. You maintain the terms of your existing mortgage if you don’t want to refinance. Unlike a traditional loan, a HELOC allows you to borrow, repay, and borrow again—similar to how a credit card works, but with much lower rates. 3. Purchase Plus Improvements Mortgage If you're in the market for a new home and find a property that needs some work, a "Purchase Plus Improvements" mortgage could be a great option. This allows you to include renovation costs in your initial mortgage. How it works: The renovation funds are advanced based on a quote and are held in trust until the work is complete. The renovations must add value to the property and meet lender requirements. This type of mortgage lets you start with a home that might be more affordable upfront and customize it to your taste—all while building equity from day one. Final Thoughts Your home is likely your biggest investment, and upgrading it wisely can enhance both your comfort and its value. Mortgage financing can be a powerful tool to fund renovations without tapping into high-interest debt. The right solution depends on your unique financial situation, goals, and timing. Let’s chat about your options, run the numbers, and create a plan that works for you. 📞 Ready to renovate? Connect anytime to get started!

Fixed vs. Variable Mortgage Rates in Canada

By Rabinder Dhillon • November 26, 2025
Fixed vs. Variable Rate Mortgages: Which One Fits Your Life? Whether you’re buying your first home, refinancing your current mortgage, or approaching renewal, one big decision stands in your way: fixed or variable rate? It’s a question many homeowners wrestle with—and the right answer depends on your goals, lifestyle, and risk tolerance. Let’s break down the key differences so you can move forward with confidence. Fixed Rate: Stability & Predictability A fixed-rate mortgage offers one major advantage: peace of mind . Your interest rate stays the same for the entire term—usually five years—regardless of what happens in the broader economy. Pros: Your monthly payment never changes during the term. Ideal if you value budgeting certainty. Shields you from rate increases. Cons: Fixed rates are usually higher than variable rates at the outset. Penalties for breaking your mortgage early can be steep , thanks to something called the Interest Rate Differential (IRD) —a complex and often costly formula used by lenders. In fact, IRD penalties have been known to reach up to 4.5% of your mortgage balance in some cases. That’s a lot to pay if you need to move, refinance, or restructure your mortgage before the end of your term. Variable Rate: Flexibility & Potential Savings With a variable-rate mortgage , your interest rate moves with the market—specifically, it adjusts based on changes to the lender’s prime rate. For example, if your mortgage is set at Prime minus 0.50% and prime is 6.00% , your rate would be 5.50% . If prime increases or decreases, your mortgage rate will change too. Pros: Typically starts out lower than a fixed rate. Penalties are simpler and smaller —usually just three months’ interest (often 2–2.5 mortgage payments). Historically, many Canadians have paid less overall interest with a variable mortgage. Cons: Your payment could increase if rates rise. Not ideal if rate fluctuations keep you up at night. The Penalty Factor: Why It Matters More Than You Think One of the biggest surprises for homeowners is the cost of breaking a mortgage early —something nearly 6 out of 10 Canadians do before their term ends. Fixed Rate = Unpredictable, potentially high penalty (IRD) Variable Rate = Predictable, usually lower penalty (3 months’ interest) Even if you don’t plan to break your mortgage, life happens—career changes, family needs, or new opportunities could shift your path. So, Which One is Best? There’s no one-size-fits-all answer. A fixed rate might be perfect for someone who wants stable budgeting and plans to stay put for years. A variable rate might work better for someone who’s financially flexible and open to market changes—or who may need to exit their mortgage early. Ultimately, the best mortgage is the one that fits your goals and your reality —not just what the bank recommends. Let's Find the Right Fit Choosing between fixed and variable isn’t just about numbers—it’s about understanding your needs, your future plans, and how much financial flexibility you want. Let’s sit down and walk through your options together. I’ll help you make an informed, confident choice—no guesswork required.