8/31/2009

Down Payments and Gifts of Equity

I've read on the forums at get rich slowly about 'gifts of equity' which is a term I've only found used in the states.

My understanding is that a gift of equity is a unique way of coming up with a down payment for a home. Basically there is a sale between family members where the current value of the home is listed as well as the price they are selling it for in the sales agreement. The difference between those two numbers is considered a 'gift of equity'. That 'gift of equity' can be used (in the sates) as their down payment on the home.




I have posted this questions on the aforementioned Get Rich Slowly Forums, and also shot it off to Gail Vaz-Oxlade.  I will let you know if I get any good information from either of those sources.  I did call my bank, they had no clue what I was talking about.  I also shot off this question to a couple of mortgage brokers, and got a few responses. 

Response One:
Unfortunately, Canadian law requires all mortgages to have a down payment. There is no recognition of an 'equity down payment' by way of a gift or otherwise. I completely understand where you are going - however our current lending laws don't provide us any options.
Response Two:
Yes, you can use a gift of equity as a down payment in Canada. Please let me know if you require further information
I find it absolutely flabbargasting that I would have two answers that are completely opposite.

Is anyone out there familiar with it?
I will be credit card debt free in 4 days!
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