How do I pay my down payment?

Real estate transactions involve a lot of money. (Duh.) Unless you’re starring in the latest Hollywood flick, you’re not going to need a suitcase full of cash to close the deal.

With your accepted purchase offer in hand, your real estate lawyer will need your down payment funds ahead of time so everything runs smoothly on closing day. Here’s what you need to know about how to transfer money to your real estate lawyer.

How soon does my real estate lawyer need the down payment money?

Typically, you’ll need to pay the down payment and any fees and closing costs a few days prior to closing. Don’t forget, the Canadian banking system operates on business days so you should take into account any delays for weekends or statutory holidays.

Keep in mind if you’re using an online bank that offers limited or no physical bank branches, you may need to first transfer your savings to another bank with branches in order to withdraw your funds. This includes online banks such as EQ Bank, Simplii Financial, or Tangerine, to name a few of the larger ones in Canada.

Once your purchase offer has been accepted, start shopping around for mortgage rates and home insurance. Don’t procrastinate! Give yourself ample time to make the right decision. The last thing you should feel is rushed into picking a mortgage without understanding the differences between fixed and variable mortgages, and any prepayment penalty fees.

If you are planning to withdraw from your RRSP under the Home Buyers’ Plan, be sure to allow for adequate processing time from your bank or financial institution that is holding your RRSP account.

For other investments such as stocks or mutual funds, start liquidating those early so you’ll have the money on hand. While it can be tempting to time the market, you want to avoid the risk of not having your down payment ready and potentially delaying your closing.

How will I know what the correct amount is to give my lawyer before closing day?

Prior to closing, your real estate lawyer or their legal assistant will reach out to set up an appointment for you to review and sign the documents. This can be done in-person or through a video conference call (Zoom, Teams, etc.) if your lawyer offers virtual signings.

They will provide a statement of adjustments, which outlines the balance you owe before closing. The statement includes your purchase price, property taxes, land transfer tax and any adjustments where the seller may have prepaid for utilities or rental equipment.

You can calculate your estimated closing costs in advance, to help you plan ahead.

How should I transfer the money from my bank account to my real estate lawyer?

Ideally, you will have already withdrawn any investments and consolidated the money for your down payment and closing costs in a single bank account. You’ll need to take into account any holds your bank may place on recent transactions, and be sure the money is in your account and available. Of course this should be in Canadian dollars.

Once your lawyer has provided a statement of adjustments, contact your bank for a bank draft. You can go to your closest bank branch and ask the teller for a bank draft in the amount specified by the lawyer. Given this is a large amount, you’ll likely be asked to provide 2 pieces of government-issued identification. When your identity has been confirmed, the teller can issue you the bank draft on the spot. 

Alternatively, you can call your bank’s customer support line and have them mail you the draft, which could take one week or more. Depending on your bank, there may be a small fee to issue the bank draft. In Canada, most banks will charge less than $20 for the bank draft.

With the bank draft, you’ll either drop it off at the lawyer’s office or deposit it in trust to their bank account. In all cases, make sure you allow enough time for the money to be received prior to closing.

What happens to my closing if I can’t get the down payment money in time?

In the worst case scenario, contact your lawyer immediately and let them know your down payment is delayed. This could jeopardize your purchase, so you’ll want to do everything you can to avoid this situation. Delaying the closing may lead to additional financial costs for you, or potentially having the deal fall through, especially if the seller is depending on this real estate transaction to finance their purchase of a new property. You likely had to submit a deposit of around 5% of the home value after the buyer accepted your offer, and you risk losing this if you don’t close on the home.

There you have it, everything you need to know in order to pay your down payment on your new home. If you’re new to homeownership, Perch has everything you need to know, and our pathfinder tool is designed to make the mortgage process as simple as possible.