With the interest rates still steadily moving up and no real end in sight it appears that people everywhere are grasping for ways to come up with the downpayment necessary to buy a home. Most people know of illegitimate ways to come up with a downpayment, but here are a couple of above board ways to reach the same goal.

First I should be clear that there are really two different tiers of downpayment verification. One for CMHC/GE Capital purchases (any purchase with less than 25% down – also referred to as high ratio). The other type of purchase is for conventional deals where the customer has a 25% downpayment. For the purposes of this article we will be looking at high ratio deals.

Among other things, in order to get your loan insured by CMHC or GE Capital your gross debt service (GDS) must not be over 32%, and your TDS must not exceed 40%. These ratios tend to have a lot more flexibility for conventional deals.

To calculate your GDS you can use this simple formula:

*This above equation equals the GDS %

The TDS ratio takes a look at what you have in your GDS ratio, but then goes on to add the other monthly debt obligations that you have. This ratio does not include things like phone bills, water and car insurance. Lenders are only able to use the information available to them on your credit bureau. This information includes, but is not limited to, car loans, credit cards, lines of credit, departments store cards, and other loans. With these new numbers added your TDS must not exceed 40%.

The first way to come up with a downpayment is to borrow an amount equal to your downpayment to put into your RRSP. Once the money has been in your RRSP for 90 days then you are free to withdraw the money under the Home Buyer’s Plan (contact Canada Customs and Revenue Agency). While you do have to consider the RRSP repayment and RRSP loan repayment in your TDS calculation, as long as the ratios are in line you should have no problem. You may also be required to demonstrate that you have a minimum of 5% of the purchase price in other liquidable assets (this tends to be very vague and often not enforced). Be sure that when you take the RRSP loan that the loan itself is not secured by the RRSPs. This will prevent you from using the RRSP until the loan is repaid.

Any asset that you own may in fact enable you to come up with a downpayment. Borrowing against recreational properties, non-registered investments or any other asset may free up the funds necessary to come up with a downpayment. As long as you have the assets to back it up then technically speaking these funds are coming from your own resources. If the money is shown to come from your own resources then you now have met downpayment guidelines for insurable loans. You just have to make sure that you play by the system’s rules.

Another way for you to minimize your cost of home entry is to consider a cash back offer, or partial cash back offer. While this won’t help you with the downpayment, it will help you get away from your closing costs. Even though these offers do not save you money when compared to a rate discount, with the rates rising this may be one of the better ways to help get you into a home while the mortgage rates are within your reach.

Until next time, best of luck finding your mortgage and home.

Calum Ross is one of Canada’s top ranked mortgage advisors. He has appeared on Canada AM, Investment Television, Report on Business Television, City TV, is an industry speaker and mortgage columnist. He holds both a B.Comm and MBA in Finance.