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How to borrow money for a down payment

Here are some sources of borrowing that can analyze. 

Line of credit

A line of credit is a unique loan product that does not work at all like a typical loan. it works much like a credit card where you withdraw funds on credit – up to the limit assigned to you – and only pay interest on the part used. Once that money is paid off, you can borrow that money over and over again, paying only interest on the amount withdrawn. 

But can you use a line of credit for a down payment? Yes, but it cannot come from the same financial institution as the mortgage obtained. 

Homebuyers can borrow against their line of credit to have the cash they need for their down payment. However, such an option should be exercised with caution in order to reduce any risk associated with over-indebtedness. 

Personal loan

A personal loan can be an option as a down payment source, but usually only if your credit score and financial history are healthy. This is because a lender will want to make sure that you are financially capable of handling additional debt, especially if you are considering taking out a mortgage to purchase a home. 

Unsecured debt – what a personal loan is – can be risky for lenders when they lend money to consumers who are not in good financial health. If there is no collateral for the lender to collect if you ever default on your loan, they could end up with a bad deal. This is why lenders will insist that borrowers have exceptional credit, high income, and reasonable debt before approving a personal loan in addition to a mortgage. 

If you are considering taking out a personal loan for your down payment, be aware that it will increase your debt and affect your debt-to-income ratio, which can make it more difficult to obtain a home loan.

Credit card

Of all the sources for borrowing money for a down payment, a credit card is probably the riskiest. Credit card debt has become a real problem in Canada, with increasing credit card debt affecting a growing number of consumers across the country. They now owe more than $ 94 billion in credit card debt, with the average amount of credit card debt currently standing at $ 2,627.

The problem with credit card debt is that it tends to be some of the most expensive debt to carry. Consumers with credit cards pay at least 20% or more interest on the money used against those cards.

Borrowing on a credit card for a down payment is not advised and should be avoided in favor of other, more secure options.


The federal government offers down payment assistance in the form of the homeownership plan. This program allows to borrow up to $ 25,000 from their RRSPs ($ 50,000 for a couple) to make a down payment towards the purchase of a home.

The great thing about this plan is that you have 15 years to pay off your RRSP funds before you get taxed. If you repay all of the borrowed money before the end of this 15-year period, the funds are not taxable.

There are eligibility requirements for the Home Buyers’ Plan. You have to:

Being a first-time home buyer

Sign a purchase contract on an eligible home

Be a Nationality

Designate the property as primary residence no later than one year after its purchase

In addition, the RRSP funds used must be on deposit for at least 90 days before borrowing.

In conclusion

Ideally, you should have taken the time to save for a down payment on a house without having to borrow money. That being said, it can be difficult to find the right amount of money for an adequate down payment amount. When all else fails, there are ways to borrow the necessary funds. Just be sure to speak with a financial advisor or mortgage specialist before deciding which route to take to achieve your real estate dreams.