Real Estate

Can I borrow money from my credit card for down payment on house?

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  • Jun 13th, 2016 1:11 pm
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[OP]
Sr. Member
Feb 14, 2010
580 posts
487 upvotes
Toronto

Can I borrow money from my credit card for down payment on house?

I'm short 20 to 30k to hit 20% on the down payment. Can I borrow from my credit card at 1% for 12 months and use a heloc to pay it back. will i run into problems getting a mortgage?
27 replies
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Apr 16, 2007
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Financial District B…
The maxed or close to maxed limit(s) will be viewable when the lender pulls your credit bureau file.
Some lenders pull twice weeks apart for this exact reason
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Nov 22, 2015
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thelastword wrote: I'm short 20 to 30k to hit 20% on the down payment. Can I borrow from my credit card at 1% for 12 months and use a heloc to pay it back. will i run into problems getting a mortgage?
You will run into all sorts of trouble if you do that. Your TDSR will be highly inflated due to the card balance, and your FI will also ask for proof of down payment.

Even though you are paying no interest, an FI will see your 30K credit card and treat it as such... which translates to over $900 monthly payments just by itself.

As I mentioned, FIs will also ask for proof of down payment in the form of 3 months bank statements or gift letter. They are looking for a gradual build up of savings to prove that you didn't borrow the money from somewhere else. Otherwise, they can also accept a letter from an immediate family member stating that the $ is a gift and never has to be repaid.

TLDR: terrible idea

Your best option is a HELOC on your existing property.
Deal Addict
Aug 10, 2013
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Toronto
It will mess up your ratios and the bank would likely deny the loan. some banks are still doing the borrowed 5% down which you get back on closing but it's a higher interest rate
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Nov 22, 2015
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Heavenleigh85 wrote: It will mess up your ratios and the bank would likely deny the loan. some banks are still doing the borrowed 5% down which you get back on closing but it's a higher interest rate
That's misleading.

You still need the 5% upfront as you won't get cashback until weeks after closing. As
well, he won't be able to avoid CMHC fee if he does this.

Cash back mortgages are always higher rate... you don't get free money for nothing. However, even with the higher rate, cashback (depending on the FI) almost always works out to a lower "effective rate" if you apply the cash back to the mortgage.

I.e. higher rate on a lower balance >> low rate on a high balance
Sr. Member
Oct 11, 2010
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Charlottetown
If you do it, do it at least 3 months before you get the mortgage
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Apr 16, 2007
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jfall wrote: If you do it, do it at least 3 months before you get the mortgage
That won't matter as the debt limits will play a significant role for overall debt service and the qualifying of the mortgage.

It'll be equivalent to applying for a mortgage with a huge auto loan.
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Sr. Member
Mar 3, 2015
699 posts
95 upvotes
Scarborough, ON
Don't ever do that.
If u do u will regret.
At current moment u must delay and save until u come up with those amount.
But if u have valuable stuff like expensive car just sell them. Also if your parents can help ask them and make serious decision to pay them back asap.
Deal Addict
Aug 31, 2014
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borrow from family and pay them back when mortgage closes
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Apr 28, 2012
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QC
mikeymike1 wrote: The maxed or close to maxed limit(s) will be viewable when the lender pulls your credit bureau file.
Some lenders pull twice weeks apart for this exact reason
soltution:
-subscribe to credit monitoring service that allows daily pulls
-pay down card balance to bring it to 0$.
-start monitoring credit report by doing daily pulls
-as soon as the card reports a 0$ balance to the credit bureau (usually 4 days after the statement is released), request a balance transfer
-immediately after the balance transfer reaches chequing account (4-5 days), apply for mortgage

You now have about 20 days before the maxed card balance appears on credit report, in case the mortgage lender does multiple inquiries. You can raise it to 25 days if you request balance transfer the day following the 0$ balance card statement date.
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Nov 22, 2015
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Flitox wrote: soltution:
-subscribe to credit monitoring service that allows daily pulls
-pay down card balance to bring it to 0$.
-start monitoring credit report by doing daily pulls
-as soon as the card reports a 0$ balance to the credit bureau (usually 4 days after the statement is released), request a balance transfer
-immediately after the balance transfer reaches chequing account (4-5 days), apply for mortgage

You now have about 20 days before the maxed card balance appears on credit report, in case the mortgage lender does multiple inquiries. You can raise it to 25 days if you request balance transfer the day following the 0$ balance card statement date.
Still doesn't get around the proof of down payment requirement though.
Deal Fanatic
Apr 16, 2007
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Flitox wrote: soltution:
-subscribe to credit monitoring service that allows daily pulls
-pay down card balance to bring it to 0$.
-start monitoring credit report by doing daily pulls
-as soon as the card reports a 0$ balance to the credit bureau (usually 4 days after the statement is released), request a balance transfer
-immediately after the balance transfer reaches chequing account (4-5 days), apply for mortgage

You now have about 20 days before the maxed card balance appears on credit report, in case the mortgage lender does multiple inquiries. You can raise it to 25 days if you request balance transfer the day following the 0$ balance card statement date.
Mortgage lenders and mortgage banks pull credit file at app submission and pull again prior to closing.

Furthermore, the OP wants to max out CC's for the down, He will not have same resources to reduce limits afterwards.


Lastly, your theory is flawed as any one tradeline is reported on a 30 day cycle. You can monitor any one trade for as much as you like, the data won't change until the next cycle comes around where that lender sends the update to the bureaus.
The card with the large balance that is being transferred also reports on a 30 day cycle so the reduction of that limit won't be reported until that trade is updated.
Moreover, you seem to think that any and all cards offer balance transfers at a whim when they actually don't.


Let me further add, not for one second should you think that lenders and card issuers don't perform multiple pulls themselves. There have been many people on here who applied for credit only to see multiple pulls appearing days of not a week apart.
And, any approved credit product can be easily rescinded. Again, some have been reported here that they got approved then denied within days.
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[OP]
Sr. Member
Feb 14, 2010
580 posts
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Toronto
thanks for all the input. guess my only option is save more, buyer a cheaper property, pay the CMHC, or get a HELCO. I'm not really the type to ask family for money.
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Nov 2, 2013
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Yes you can but it will dramatically reduce your mortgage eligible amount, so most of the time it won't work unless you have a very high income relative to the home you want.

e.g. If you borrow 15K, that's a $450/month min. Payment. Now you have $450 less you can use for your mortgage payment... 100K less mortgage you can take on a 2.69%.

Also the lender will ask for the last 3 months of bank statements and ask to verify your sudden source of funds.
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superfresh89 wrote:
even with the higher rate, cashback (depending on the FI) almost always works out to a lower "effective rate" if you apply the cash back to the mortgage.

I.e. higher rate on a lower balance >> low rate on a high balance
Cashback Mortgages are uncommon but they're a very interesting product. A double edged sword in a way.

The kicker is when you sign the lawyer papers, there is an additional clause that states you'll be penalized a certain portion of all of the Cashback amount if you break the term early. With CIBC who offers the lowest rate, it's the whole Cashback amount.

Bank charges higher interest rate to gradually collect the Cashback amount back in interest over the years, and to make sure they do, they make you pay back the Cashback if you break early. So if you break early, you ended up paying:

(1) typical mortgage penalties
(2) Cashback given to you or a portion
(3) higher interest compared to a conventional mortgage

It's also to encourage you to remain as their customer!!! :lol:

However, if you invest the Cashback, you DO come ahead if you do NOT break the mortgage term early, but statistically this doesn't happen often (otherwise, why would banks offer this product?). Someone taking this product is usually a risk taker- so using this to your advantage, say your DP was 30K. Invest this for 5 years at a compounded 15% (again this can be even higher since you're a risk taker, and you have balls to buy and hold for 5 years...) annually and you would have doubled it. Or you could have say, used it to pay down your 4.9% car loan.

There is a trick to use that additional interest as a tax write off though if you rent the property out. With the right property in theory you can reduce your taxes payable to near 0 and achieve 8x%+ ROI BEFORE appreciation, but it's very difficult to do unless you have high income and otherwise low other debts so you can service this debt, and much more realistic in high rent-to-property value ratio areas like Alberta. I'd write the math here but it's long; could PM me if you're really interested and I'll write it when I have time.
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thelastword wrote: thanks for all the input. guess my only option is save more, buyer a cheaper property, pay the CMHC, or get a HELCO. I'm not really the type to ask family for money.
So you'll ask an anonymous banker for money but not family. Interesting.

In any case, I'd go with a lower priced property anyhow. Keep things affordable and within your means.
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atomiton wrote: So you'll ask an anonymous banker for money but not family. Interesting.

In any case, I'd go with a lower priced property anyhow. Keep things affordable and within your means.
Family (especially Asians) can be extremely judgmental when it comes to money. Whites usually could care less about what you do in your spare time. I don't talk to my own family about my stocks or real estate, but to a stranger I don't have a problem.

A lower priced property is not a life sentence anyhow. I make the equivalent of 106K working 6 months of the year but my mortgage is about 314K. My logic at the time was to maintain positive cash flow every month to invest, grow, and live a balanced lifestyle enjoying different hobbies instead of just camping in my house.

You can rent it out later or sell it after collecting equity and appreciation.
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atomiton wrote: So you'll ask an anonymous banker for money but not family. Interesting.
It might be sacrilegious to say this so close to fathers day. But for some the dear old dad easy loan and finance company might appear to have a lower interest rate on the surface, there can sometimes be hidden costs. Knowing this in advance might prevent some from asking.
Banks are regulated, family is not. A mortgage comes to an end at a specified time, families continue on.
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ROYinTO wrote: It might be sacrilegious to say this so close to fathers day. But for some the dear old dad easy loan and finance company might appear to have a lower interest rate on the surface, there can sometimes be hidden costs. Knowing this in advance might prevent some from asking.
Banks are regulated, family is not. A mortgage comes to an end at a specified time, families continue on.
Hehe. Fair point.

The bank of mom and dad... Isn't that part of what's to blame for our recent crazy house prices anyhow. Lol.

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