Consistently
tightening mortgage rules combined with low interest rates have caused several
lenders to revise their guidelines for gifted down payments.
As per CMHC, the person gifting the funds has to be a relative and the funds have to truly be a gift (no repayment required). Traditionally, they have only required a gift letter signed by both parties along with proof of the funds being deposited into the recipient’s account. Several lenders have now adjusted their supporting document requirements and they will now need to see one of the following along with proof of the funds being in the recipient’s account:
As per CMHC, the person gifting the funds has to be a relative and the funds have to truly be a gift (no repayment required). Traditionally, they have only required a gift letter signed by both parties along with proof of the funds being deposited into the recipient’s account. Several lenders have now adjusted their supporting document requirements and they will now need to see one of the following along with proof of the funds being in the recipient’s account:
1. Proof of the funds
being in the relative’s account prior to the transfer of funds
2. A letter from the
relative’s financial institution stating that they have adequate funds to cover
the gifted amount
Lenders
now have more pressure to evaluate the overall risk of a file and although CMHC
does consider this type of down payment to be “traditional”,
most prefer to have at least part of the funds from the client’s savings. That
being said, we still have access to numerous lenders who still only require the
gift letter and deposit and who are very flexible with down payment options.
For
questions about this potential requirement, down payment options, or for any
mortgage related questions – please feel free to contact me today.
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