Most of us don’t deal with bank drafts on a regular basis. So if you’re not familiar with what they are or how it works, we’re here to get you sorted. Protip: If you need to move around a large sum of money, they’re way more convenient —and safer—to use than carrying around stacks of $100 bills.
What is a bank draft?
On paper, a bank draft in Canada looks very similar to a cheque. However, a cheque could bounce if you try to deposit it and the money isn’t in the issuer’s account. The Canadian banking system isn’t instant, so it takes a few days while the money is on hold for your bank to confirm it’s available. This is why you typically can’t spend the money from a deposited cheque right away, especially if it’s a larger amount.
Think of a bank draft like a pre-cleared cheque. In other words, the dollar amount that is stated on the bank draft is guaranteed to be available in the account it’s drawn from. It’s treated like a form of cash and should be kept in a safe place until you’re ready to deposit it or give the bank draft to the intended recipient.
Why is my real estate lawyer asking for a bank draft?
Real estate transactions involve large amounts of money being moved from one account to another. If you’re getting a mortgage, your mortgage lender will issue funds to your real estate lawyer. You will need to give your down payment to your lawyer ahead of closing too. Your lawyer will hold those funds in trust. This protects you, since the seller doesn’t receive the money until both parties have reviewed the paperwork and signed off.
Think about how much harder it would be if the funds being moved were in literal dollar bills. There would be a lot of recounting involved and things would move much slower. In most cases, your lawyer will ask for your down payment and closing costs to be paid through a bank draft.
How long does it take to get a bank draft issued in Canada?
If you visit your local bank branch, you should be able to get a bank draft issued on the spot. Bring your bank card and two pieces of government-issued photo ID. The teller may need to wait for the branch manager to approve your request if the bank draft is for a significant sum of money.
If you’re using an online bank like Tangerine or Simplii, it could take up to one week or more to have your bank draft couriered.
How much does it cost to get a bank draft in Canada?
The cost of a bank draft will vary depending on how much your bank charges, whether you need them to courier the bank draft, and the type of account you have with your bank. Some banks will waive their fee to issue a bank draft, if you hold a premium account type or have preferred client status.
In general, in 2022, getting a bank draft costs between $10 to $20.
Where can I go to get a bank draft?
You can visit your local bank branch and get a bank draft issued on the spot by a teller, assuming you have the available funds already in your account. If you have an account with one of the following banks, also known as the “Big Five” in Canada or a “bricks and mortar bank” you should be able to do this and get a same day bank draft:
- Royal Bank of Canada (RBC)
- Bank of Nova Scotia (Scotiabank)
- Bank of Montreal (BMO)
- Canadian Imperial Bank of Commerce (CIBC)
- Toronto Dominion (TD) mortgage rates
If you have an account with an online bank, you may need to call in to order a bank draft. The bank draft will be couriered to you, which could take one week or more, so this isn’t a good option if you need a same day bank draft. The best online banks in Canada include:
What else should I know about bank drafts?
Before placing an order for a bank draft, make sure the money is available in your account. If you hold multiple bank accounts or have investments, we recommend transferring the funds well in advance so you avoid the money being placed on hold. It may be easier to get a bank draft from your local branch, so consider consolidating your down payment and closing costs in a single account held at one of the Big Five banks listed above.
When getting a bank draft issued, check the receiver’s name and the dollar amount are input correctly. Any typos could lead to a delay in being able to close on time.
Most importantly, give yourself plenty of time to send the draft. You’ll probably have to go to the bank to do it, and you don’t want to leave it to the last possible moment and risk missing the closing date on your home.
If you have other questions about the mortgage process, our dedicated mortgage advisors are here to help you and can tailor their advice to your exact situation. Sign up to Perch and get on-demand access to our experienced mortgage advisors at every step.