Why Downpayment Source Matters

Wyatt Tunnicliffe • March 5, 2025

If you’re looking to purchase a property, although you might not think it matters too much, the source of your downpayment means a great deal to the lender. Let’s discuss the lender requirements, what your downpayment tells the lender about your financial situation, a how downpayment helps establish the mortgage loan to value.


Anti-money laundering

 

Lenders care about your downpayment source because, legally, they have to. To prevent money laundering, lenders have to document the source of the downpayment on every home purchase.


Acceptable forms of downpayment are money from your resources, borrowed funds through an insured program called the FlexDown, or money you receive as a gift from an immediate family member.


To prove the funds are from your resources and not laundered money from the proceeds of crime, you’ll be required to provide bank statements showing the money has been in your account for at least 90 days or that you’ve accumulated the funds through payroll deposits or other acceptable means.


Now, if you’re borrowing all or part of your downpayment, you’ll need to include the costs of carrying the payments on the borrowed downpayment in your debt service ratios. If you’re the recipient of a gift from a direct family member, you’ll need to provide a signed gift letter indicating that the funds are a true gift and have no schedule for repayment. From there, you’ll need to show the money deposit into your account.


Financial suitability


Lenders care about the source of the downpayment because it is an indicator that you are financially able to purchase the property.


Showing the lender that your downpayment is coming from your resources is the best. This demonstrates that you have positive cash flow and that you’re able to save money and manage your finances in a way that indicates you’ll most likely make your mortgage payments on time. If your downpayment is borrowed or from a gift, there’s a chance that they’ll want to scrutinize the rest of your application more closely.


The bigger your downpayment, the better, well, as far as the lender is concerned. The way they see it, there is a direct correlation between how much money you have as equity to the likelihood you will or won’t default on their mortgage. Essentially, the more equity you have, the less likely you will walk away from the mortgage, which lessens their risk.


Downpayment establishes the loan to value (LTV)


Thirdly, your downpayment establishes the loan to value ratio. The loan to value ratio or LTV is the percentage of the property’s value compared to the mortgage amount. In Canada, a lender cannot lend more than 95% of a property’s value. So, if you’re buying a home for $400k, the lender can lend $380k, and you’re responsible for coming up with 5%, $ 20k in this situation.


But you might be asking yourself, how does the source of the downpayment impact LTV? Great question, and to answer this, we have to look at how to establish property value. Simply put, something is worth what someone is willing to pay for it and what someone is willing to sell it for. Of course, within reason, having no external factors coming into play. When dealing with real estate, an appraisal of the property will include comparisons of what other people have agreed to pay for similar properties in the past.


You’ll often hear of situations where buyers and sellers try to inflate the sale price to help finalize the transaction artificially. Any scenario where the buyer isn’t coming up with all of the money for the downpayment, independent of the seller, impacts the LTV.


All details of a real estate transaction purchase and sale have to be disclosed to the lender. If there’s any money transferring behind the scenes, this impacts the LTV, and the lender won’t proceed with financing. Non-disclosure to the lender is mortgage fraud.


So there you have it; hopefully, this provides context to why lenders ask for documents to prove the source of your downpayment. If you’d like to talk about mortgage financing, please connect anytime; it would be a pleasure to work with you.


Wyatt Tunnicliffe

Mortgage Broker

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Fixed vs. Variable Mortgage Rates in Canada

By Wyatt Tunnicliffe • October 15, 2025
Fixed vs. Variable Rate Mortgages: Which One Fits Your Life? Whether you’re buying your first home, refinancing your current mortgage, or approaching renewal, one big decision stands in your way: fixed or variable rate? It’s a question many homeowners wrestle with—and the right answer depends on your goals, lifestyle, and risk tolerance. Let’s break down the key differences so you can move forward with confidence. Fixed Rate: Stability & Predictability A fixed-rate mortgage offers one major advantage: peace of mind . Your interest rate stays the same for the entire term—usually five years—regardless of what happens in the broader economy. Pros: Your monthly payment never changes during the term. Ideal if you value budgeting certainty. Shields you from rate increases. Cons: Fixed rates are usually higher than variable rates at the outset. Penalties for breaking your mortgage early can be steep , thanks to something called the Interest Rate Differential (IRD) —a complex and often costly formula used by lenders. In fact, IRD penalties have been known to reach up to 4.5% of your mortgage balance in some cases. That’s a lot to pay if you need to move, refinance, or restructure your mortgage before the end of your term. Variable Rate: Flexibility & Potential Savings With a variable-rate mortgage , your interest rate moves with the market—specifically, it adjusts based on changes to the lender’s prime rate. For example, if your mortgage is set at Prime minus 0.50% and prime is 6.00% , your rate would be 5.50% . If prime increases or decreases, your mortgage rate will change too. Pros: Typically starts out lower than a fixed rate. Penalties are simpler and smaller —usually just three months’ interest (often 2–2.5 mortgage payments). Historically, many Canadians have paid less overall interest with a variable mortgage. Cons: Your payment could increase if rates rise. Not ideal if rate fluctuations keep you up at night. The Penalty Factor: Why It Matters More Than You Think One of the biggest surprises for homeowners is the cost of breaking a mortgage early —something nearly 6 out of 10 Canadians do before their term ends. Fixed Rate = Unpredictable, potentially high penalty (IRD) Variable Rate = Predictable, usually lower penalty (3 months’ interest) Even if you don’t plan to break your mortgage, life happens—career changes, family needs, or new opportunities could shift your path. So, Which One is Best? There’s no one-size-fits-all answer. A fixed rate might be perfect for someone who wants stable budgeting and plans to stay put for years. A variable rate might work better for someone who’s financially flexible and open to market changes—or who may need to exit their mortgage early. Ultimately, the best mortgage is the one that fits your goals and your reality —not just what the bank recommends. Let's Find the Right Fit Choosing between fixed and variable isn’t just about numbers—it’s about understanding your needs, your future plans, and how much financial flexibility you want. Let’s sit down and walk through your options together. I’ll help you make an informed, confident choice—no guesswork required.

Why You Should Work With An Independent Mortgage Professional

By Wyatt Tunnicliffe • October 8, 2025
If you need a mortgage, working with an independent mortgage professional will save you money and provide you with better options than dealing with a single financial institution. And if that is the only sentence you read in this entire article, you already know all you need to know. However, if you’d like to dig a little deeper, here are some reasons that outline why working with an independent mortgage professional is in your best interest. The best mortgage is the one that costs you the least over the long term. An independent mortgage professional can help you achieve this. Mortgages aren’t created equally. Oftentimes slick marketing leads us to believe the lowest “sticker price” is the best value. So when it comes to mortgage financing, you might assume the mortgage with the lowest rate is the best option. This isn’t always the case. When considering a mortgage, your goal should be to find the mortgage that will cost you the least amount of money over the total length of the mortgage. There are many factors to consider, such as your specific financial situation, the rate, initial term length, fixed or variable rate structure, amortization, and the penalties incurred should you need to break your mortgage early; the fine print matters. An independent mortgage professional can walk through all these factors with you and will help you find the mortgage that best suits your needs. Sometimes taking a mortgage with a slightly higher rate can make sense if it gives you flexibility down the line or helps you avoid huge payout penalties. Working the numbers with an independent mortgage professional will save you money in the long run instead of just going with what a single lender is offering. Save time by letting an independent mortgage professional find the best mortgage product for you. Let's face it, getting a mortgage can be challenging enough on its own. Everyone’s financial situation is a little different and making sense of lender guidelines is a full-time job in itself. So instead of dealing with multiple lending institutions on your own, when you work with an independent mortgage professional, you submit a single mortgage application that is compared to the lending guidelines of various mortgage lenders. This will save you time as you don’t have to go from bank to bank to ensure you’re getting the best mortgage. Simply put, an independent mortgage professional works for you and has your best interest in mind, while a bank specialist works for the bank and has the bank's best interest in mind. It’s no secret that Canadian banks make a lot of money. It seems every quarter they turn billions of dollars in profit (despite the economic environment). They do this at the expense of their customers by charging as much interest as they can and structuring mortgages to their benefit. It’s all about the alignment of interest. Bank employees work for the bank; the bank pays them to make money for the bank. In contrast, independent mortgage professionals are provincially licensed to work for their clients and are paid a standardized placement or finder’s fee for matching borrowers with lenders. When you work with a single bank, you only have access to the products of that bank. When you work with an independent mortgage professional, you have access to all of the lenders that mortgage professionals have relationships with and all their products. Working with an independent mortgage professional will save you money, time, and provide you with better mortgage options. Plus, you have the added benefit of working with a licensed professional looking out for your best interest, providing you with the best possible advice. If you’d like to know more or to discuss mortgage financing, please connect anytime; it would be a pleasure to work with you.