Can You Use a Borrowed Down Payment to Buy a Home in BC?

You may be wondering whether the money for your down payment can come from a personal loan or a line of credit. It is a common question for first-time buyers in British Columbia who have steady income but limited savings.

The short answer is that it is usually not allowed, but there is a narrow exception. This article explains the normal rule, the exception, what it costs, and who cannot use it, so you know what to ask your lender.

This article covers the law of British Columbia.

The normal rule: your own funds

Normally the minimum down payment must come from the buyer's own funds. That means savings and similar money that belongs to you, not money you have borrowed and must repay.

Mortgage loan insurance is typically needed if your down payment is less than 20% of the purchase price. A lender may also require insurance even with 20% down, usually if you are self-employed or have a poor credit history.

The exception: a non-traditional down payment

CMHC lets some borrowers of 1 to 2 unit homes who have a strong credit history use a non-traditional down payment, such as an unsecured personal loan or line of credit, at 90.01% to 95% loan-to-value.

• It applies to 1 to 2 unit homes.
• It requires a strong credit history.
• It applies at 90.01% to 95% loan-to-value.
• The home must be intended for homeowner occupancy.

Whether you qualify is for the lender and insurer to decide, so do not assume a loan or line of credit will be accepted until your lender confirms it.

What it costs

CMHC says mortgage loan insurance protects the lender if the borrower cannot make payments. The lender pays the premium but likely passes the cost to you, and you can pay a lump sum or add it to the mortgage and pay over time.

Premiums are a one-time charge that may be added to the insured loan. Adding it means you borrow and pay interest on it, so the exception costs more than the standard route. You would also be repaying the borrowed down payment on top of the mortgage.

How the minimum down payment is worked out

• Price of $500,000 or less: 5% of the purchase price.
• Price between $500,000 and $1.5 million: 5% of the first $500,000 plus 10% of the amount above $500,000.
• Price of $1.5 million or more: 20% of the whole purchase price.

For a $1 million home, that is 5% of $500,000 ($25,000) plus 10% of $500,000 ($50,000), or $75,000, but only if the lender and insurer accept it.

Who cannot use this route

• Homes priced at $1.5 million or more, because mortgage insurance is not available and you need 20% down with an uninsured mortgage.
• Rental or investment properties, which are not eligible for CMHC's 5%-down homeowner product.
• 3 to 4 unit homes, which need 10% down with a maximum 90% loan-to-value, below the range where the exception applies.

The insured mortgage price cap rose from $1 million to $1.5 million effective December 15, 2024. Some consumer pages still show the older $1 million wording, so if your home is priced between those amounts, confirm with your lender.

What to do next

• Ask your lender whether it accepts a non-traditional down payment and what credit history it expects.
• Confirm the price cap and premium that apply to your purchase.
• Gather your documents; lenders typically ask for ID, proof of employment, and proof of down payment and closing costs.
• If you are self-employed, expect to provide two years of CRA notices of assessment.
• Remember that pre-approval does not guarantee approval.

If your situation is unusual, a lawyer or mortgage professional can help you confirm what applies before you make an offer.

Frequently asked questions