I have steady employment with a decent salary, and I found my dream condo, but my mortgage broker says I need a larger down payment. Can I borrow money from family or friends to make up the difference?
Unfortunately, no.
To obtain a mortgage in Canada you must provide proof that the money you’re putting as your down payment comes from your own funds. Lenders want to make sure they’re lending money to people who can afford to pay the money back.
Because of this, when you apply for a mortgage, the lender will likely ask to see three or more months of bank statements for the account from which you’ll be withdrawing the funds. From your statements, they will verify that your down payment money is truly yours, that you had the ability to put that money aside—so they will look for regular payments into the account, either from your employer or transferred from another one of your accounts.
Family members can sometimes “give” you some of the funds needed, but it must truly be a gift and not a loan. If someone were to lend you money for your down payment, or part of your down payment, you effectively owe more money than what it shows on your mortgage.
Your lender is qualifying you for a certain amount of mortgage based on the amount of money you can afford to pay each month towards the mortgage debt. If someone loans you money, you need to add the repayment of those loaned funds on to what you owe on the mortgage—and you could find yourself overextended.
Your lender, even if not physically reviewing your account history, is going to ask you for some sort of statement about where the funds have come from.
There is no such thing as a little white lie during the mortgage application process. It doesn’t matter if you’re lying about the source of funds, how much you make, who your employer is, how long you’ve been employed, or your planned use for the property—that is, whether it will be your residence or an income property. By lying on your mortgage application, you’re committing mortgage fraud.
Fraud is a Criminal Code offence. If you get caught committing any fraud, including mortgage fraud, you can be charged and prosecuted for the offence and may face fines and jail time.
I encourage you to talk about your options with a licensed mortgage brokerage professional. There might be mortgage products available to assist with your ability to purchase the property. Or it may be better to wait until you have a larger down payment.
There are options available to you but lying on your mortgage application isn’t one of them.
You’ve got questions. He’s got answers.
Charles Stevenson is the Registrar at the Real Estate Council of Alberta. Charles knows that buying and selling a home can be confusing, but it doesn’t have to be. “Ask Charles” is a question-and-answer column for consumers about buying and selling property in Alberta.
If you have a new question for Charles, please email [email protected].
