When you purchase a home, a down payment of at least 5% is required. This money can come from a few different sources and each has different paperwork or documentation that must be shown.
Savings
If you have the money in a bank account then a 3 month history of that account must be supplied. This is to prove ownership of the funds and to comply with Canada’s anti-money laundering laws. You cannot use cash because there is no paper trail to prove where the money originated.
Gifts
All or part of the down payment can be a gift of funds from a family member, often it must be an immediate family member but sometimes exceptions can be made for aunts/uncles/etc. When a gift is taking place, the lender will require that a gift letter is completed and signed by the person gifting the funds and the person purchasing the home. The letter is to show that there is no repayment of the funds being required, otherwise it becomes a loan and the repayment of the money must be included with all of the other debt responsibilities.
RRSP
If you have money in RRSPs and you have not owned a home in the past 4 years (or lived in your spouse’s home for 4 years), then you are able to take part in the First Time Homebuyers plan which allows you to removed up to $25,000 without paying taxes. You then start to repay the money back into the RRSP two years later over a 15 year period.
Stocks, bonds, mutual funds, TFSA, etc
These investments can be cashed in and used for a down payment as long as a 3 month history of the funds is available to prove ownership.
These are the most common forms of down payment funds. There can be other unique scenarios, such as an inheritance or sale of property or goods that can sometimes be approved. Ultimately it is always crucial to have a proper paper trail to prove the source of the funds and the ownership. Please reach out to me if you have any specific questions with respect to a down payment.