CMHC won`t use a gift as a downpayment for Rentals

[ctang]

Hi, all
Trying to get Financing by condition date: Jan. 22, 2010 for my first rental property (4 plex in Halifax, NS) and my mortgage broker just told me that CMHC will not accept a gift as a down payment.

Sale price 408k
I`m putting 10% (most I can put down), amort 35 years.

The down payment is coming from a relative and it`ll be wired transferred (from oversears) into my account so my account will all of a sudden have an extra 50-60k...


What are my options? say it`s coming from an investment account that me and my relative has overseas?
what paperwork will I need?


thanks in advance for any feedback.

Chung

 

[RobMacdonald]

There are not really any options for a gifted downpayment under the CMHC program. All lenders are going to ask for a 90 day history to show that the funds have been in your possession in order to determine that the down payment is not a gift.

The other alternative is to have the grantor sign on the mortgage with you, but I don`t think that`s really a good option for you as your relative is overseas.

 

[ctang]

QUOTE (RobMacdonald @ Jan 18 2010, 03:51 PM) There are not really any options for a gifted downpayment under the CMHC program. All lenders are going to ask for a 90 day history to show that the funds have been in your possession in order to determine that the down payment is not a gift.

The other alternative is to have the grantor sign on the mortgage with you, but I don`t think that`s really a good option for you as your relative is overseas.

Seems like I don`t have a lot of options...

Could I use a silent partner (i.e., mom or dad) to put down the down payment from their bank account, then I will pay them after I close?

 

[Tootse]

QUOTE (ctang @ Jan 18 2010, 04:21 PM) Seems like I don`t have a lot of options...

Could I use a silent partner (i.e., mom or dad) to put down the down payment from their bank account, then I will pay them after I close?


I would guess that using a silent partner would still prompt CMHC to ask whether or not it has to be paid back...in other words this is also a gift. Though there is usually more than one way to do things, I think holding the money in your account for 3 months might be your only option. Any way the deal can be delayed?

 

[mortgageman]

Why don`t you see if your parents are interested in being on the mortgage with you.
Then they can provide the down payment.
If they have good credit and help the deal in terms of debt servicing then you should be good to go.

 

[ctang]

Closing is Feb 24...delaying it for another 2 months probably won`t work..

My parents don`t have good credit..but I do...any other way it`ll work?

What is they were just someone who provided the downpayment as a JV partner? Would that work with CMHC? Is there any way this could work?

Appreciate any more feedback.

Thanks guys

 

[NiagaraInvestor]

Also watch out for the bank holding up the cash and reporting it to the CRA..  Anything over 10K coming from overseas and they have to account for it..  This may hold things up.

As for the 90 day rule, showing proof you`ve had the funds for at least 90 days, I haven`t run into that before I just coughed up my down payment when it was time to do so no questions asked.  Of course that was two years ago...

I take it this is new??


Regardless, if you get any resistance from your lender simply find another one.  Mortgage brokers are a dime a dozen and are probably the best bet for solving these problems.  So try a few and see what they say..
Otherwise without more cash to beat the 20% threshold, i think, you may just have to try and push it back..   

 

[ctang]

QUOTE (NiagaraInvestor @ Jan 18 2010, 10:23 PM) Also watch out for the bank holding up the cash and reporting it to the CRA.. Anything over 10K coming from overseas and they have to account for it.. This may hold things up.

How would they account for it? make me pay taxes?

QUOTE (NiagaraInvestor @ Jan 18 2010, 10:23 PM) As for the 90 day rule, showing proof you`ve had the funds for at least 90 days, I haven`t run into that before I just coughed up my down payment when it was time to do so no questions asked. Of course that was two years ago...

I take it this is new??


Regardless, if you get any resistance from your lender simply find another one. Mortgage brokers are a dime a dozen and are probably the best bet for solving these problems. So try a few and see what they say..
Otherwise without more cash to beat the 20% threshold, i think, you may just have to try and push it back..

Building is 60 yrs old and yes it is my first if that`s what you mean by new.
My lender is doing all that he can. It`s really inheritance money from 20 years ago..just not sure how to proof that since the will is in Chinese.. anyway, you`re right, i`ll just keep on pushing..

 

[NiagaraInvestor]

QUOTE (ctang @ Jan 18 2010, 10:32 PM) How would they account for it? make me pay taxes?

Building is 60 yrs old and yes it is my first if that`s what you mean by new.
My lender is doing all that he can. It`s really inheritance money from 20 years ago..just not sure how to proof that since the will is in Chinese.. anyway, you`re right, i`ll just keep on pushing..



Tax I don`t think so, but anti money laundering legislation mandates that banks have to report transfers of funds in or out of Canada worth more than $10,000.

http://www.rcmp-grc.gc.ca/poc-pdc/launder-blanchir-eng.htm

Here`s a bit from the RCMP website"

foreign exchange outlets and money services businesses, which have detected a suspicious transaction, or conducted cash transactions or wire transfers in/out of Canada worth $10,000 and over. Records related to these transactions must be kept for a period of five years.

What information should be reported?
Information about the reporting entity as well as details about the person conducting the transaction.

I personally was questioned on a transaction just under 10,000 but they found my explanation satisfactory so my cash wasn`t held up.  Of course they knew me very well.  In your case they may ask for some supporting documentation and this may hold things up.  Recently read in the Globe, I think, that the banks are jumping the gun and often reporting transfers under $10,000.

Maybe a few phone calls first to your bank and if necessary Rev can to ensure things go smoothly.  Maybe getting that will translated isn`t a bad idea since it would show where the money came from... 

As for the transaction, what I meant by "new" is the "no gift/90 day" rule itself.  My last purchase I simply got a money order for %10 down from a PC fianancial account.  the money came from a previous deal completed less than 90 days before.  No questions were asked about gifts, 90 days or even where it came from etc..

This was March 2007 so that`s why I`m wondering if these are "new" rules for purchasing rentals..

Anyways don`t let these details hold you up too much.  My first deal was horribly complicated too.  If had listened to all the "you can`t do that" people I wouldn`t have got it done or done any of the most interesting things I`ve done in my life!...

Definitely keep pushing!!!!

Hope this helps.  Keep us informed!!

 

[ctang]

I appreciate that.

As long as I`m honest and tell them where the money came from, and provide them whatever document they want, it should be no problem.


And to keep you guys informed...
Removal of my conditions is tomorrow and Still no financing..I am having my realtor extend the condition and closing date as a result of down payment delay.

here`s the issue my mortgage broker is having.

He`s sent it to 2 lenders already and both said no and their reasons were my length of employment (less than 6 months) and only 2 credit lines (equifax reported 2/3 credit cards) and my income is under 27k per year.

If he can get me the loan, would a PK approved mortgage broker be able to get me the money?

I have no skeletons and have all the necessary paperwork..

What should I do?

 

[fumbrunner]

QUOTE (ctang @ Jan 20 2010, 02:04 PM) I appreciate that.

As long as I`m honest and tell them where the money came from, and provide them whatever document they want, it should be no problem.


And to keep you guys informed...
Removal of my conditions is tomorrow and Still no financing..I am having my realtor extend the condition and closing date as a result of down payment delay.

here`s the issue my mortgage broker is having.

He`s sent it to 2 lenders already and both said no and their reasons were my length of employment (less than 6 months) and only 2 credit lines (equifax reported 2/3 credit cards) and my income is under 27k per year.

If he can get me the loan, would a PK approved mortgage broker be able to get me the money?

I have no skeletons and have all the necessary paperwork..

What should I do?

With those details, I suspect it will be virtually impossible for your broker to find an institution that will finance your purchase. your length of employment is an issue. your income level would likely lead to high debt servicing ratios. I suspect your net worth is not high enough either. You don`t have a down payment except for foreign funds. Your parents, who would most definitely have to co-sign, have bad credit. Those are all flags, without even looking at the cashflow of a 4 plex for 400K+.

My suggestion is to get that money into an account here adn look for a smaller purchase that cashflows and you can put 20% down. At 20%, financing becomes much easier.

 

[ctang]

QUOTE (fumbrunner @ Jan 20 2010, 04:22 PM) With those details, I suspect it will be virtually impossible for your broker to find an institution that will finance your purchase. your length of employment is an issue. your income level would likely lead to high debt servicing ratios. I suspect your net worth is not high enough either. You don`t have a down payment except for foreign funds. Your parents, who would most definitely have to co-sign, have bad credit. Those are all flags, without even looking at the cashflow of a 4 plex for 400K+.

My suggestion is to get that money into an account here adn look for a smaller purchase that cashflows and you can put 20% down. At 20%, financing becomes much easier.

Yah, my mortgage broker called and it looks like I`m SOL. My realtor might go in on a JV with me so if he decides to great, if not, i`ll just assign it to him.

My debt servicing ratio is less than 40%..that`s with an 80% rental offset, anyway, I will see tomorrow if he wants to do a JV.

 

[fumbrunner]

QUOTE (ctang @ Jan 21 2010, 08:42 PM) Yah, my mortgage broker called and it looks like I`m SOL. My realtor might go in on a JV with me so if he decides to great, if not, i`ll just assign it to him.

My debt servicing ratio is less than 40%..that`s with an 80% rental offset, anyway, I will see tomorrow if he wants to do a JV.

Start small. There is no need to jump into a 4 plex as your first property unless you have the down payment to purchase it. Get those funds into an account here and look to purchase something where you could put 20% down. If you could find something that needs a bit of work, even better. Finding an undervalued property where you could take out equity after some renos is a great way to finance future projects!

Good luck.