🏠 Down Payment Documentation: What You Need to Know
When applying for a mortgage in Canada, lenders are required to verify the source of your down payment to comply with anti-money laundering (AML) regulations set by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). This process ensures that your funds are from legitimate sources and helps prevent financial crimes such as money laundering and terrorist financing.
✅ What Lenders Require
To satisfy these regulatory requirements, lenders typically ask for:
90-Day Transaction History: A complete, consecutive 90-day transaction history for the account(s) holding your down payment. This history must include your name, account number, and all deposits and withdrawals during this period.
*the 90 day activity is from the day your mortgage is submitted for the approval- back 90 days.
Source Verification for Large or Unusual Deposits: Any large or unusual deposits (e.g., over $1,000) need to be explained and supported with documentation. This requirement also applies to smaller deposits if they are numerous and consistent.
📄 Acceptable Sources of Down Payment Funds
Lenders accept various sources for your down payment, provided they are well-documented:
Personal Savings: Funds accumulated over time in your personal bank accounts.
Registered Accounts: Withdrawals from RRSPs or TFSAs, provided the funds have been in the account for at least 90 days.
Gifts from Immediate Family: A signed gift letter from the donor, stating the amount and relationship, along with proof of deposit.
Sale of Assets: Proceeds from selling items like vehicles, with supporting documents such as a bill of sale and proof of deposit.
Proceeds from Property Sale: Net proceeds from selling a property, supported by a statement of adjustments from your lawyer.
Government Rebates or Tax Returns: Deposits from tax refunds, with matching documentation like a Notice of Assessment.
🚫 Sources Not Accepted
Lenders do not accept the following as sources for your down payment:
Unexplained Cash Deposits: Funds that cannot be traced back to a legitimate source.
Loans from Friends or Non-Family Members: Borrowed money that is not from an immediate family member.
Funds from Sanctioned Countries: Money originating from countries under international sanctions.
💡 Tips for Providing Documentation
Use online banking- but login in through your browser as Mobile APPS do not have as many options.
Ensure Clarity: All documents should clearly display your name, account number, and transaction details. If the activity view does not show your name, pair it with a recent statement or even a void cheque to cross reference your name to the account number.
Include All Pages: Provide complete bank statements or transaction histories, not partial or altered documents. Avoid filtering out transactions.
Explain Large Deposits: For any deposit over $1,000, provide a clear explanation and supporting documentation.
Tips for Avoiding Printing – How to Simplify the Paperwork
Use Lender-Specific Forms: If your down payment is a gift, use the gift letter provided by your lender. Your broker will provide this to you with the approval conditions.
📌 Additional Considerations
Closing Costs: In addition to your down payment, your lender will require proof that you have sufficient funds to cover additional expenses. These are referred to as closing costs. Your lawyer will provide the exact amount you need to bring to finalize transaction. To ensure the closing proceeds smoothly, your lender will need to see in your accounts, an additional amount ranging from .05% to 1.5% of the purchase price, depending on their policy.
Foreign Funds: If your down payment includes funds from outside Canada, be prepared to provide detailed documentation, including wire transfer receipts and proof of the source of funds.
By following these guidelines and providing the necessary documentation, you can help ensure a smooth mortgage approval process. Before you start moving your down payment money around, and if you have any questions or need assistance, please don’t hesitate to talk to your mortgage sister. We are here to help!