The results from the Finder’s Global Investing Adoption survey revealed that roughly 40% of Canadians invest in stocks. What about other investment vehicles and burgeoning trends like crypto? In this month’s blog story, we look at two stories that compare and contrast the ease and difficulty of using certain investment income with relation to a mortgage.
Two parents and the eldest child of the family were interested in investing in real estate and approached us to work on their file. In typical Ottawa fashion, the mom works for the federal government in a mid-level position, the dad is a construction labourer, and the eldest daughter is fresh out of school working as a customer service associate. Mom and dad had a portion of the down payment set aside in savings and had started planning the purchase of their second home (wanting to keep their existing home as a rental).
With prices steadily increasing and supply quickly diminishing, the family was forced into a higher price point than what they were planning. We discussed the option of adding additional income to the deal by having their daughter get involved with the purchase. Her involvement brought additional income as well as additional money for the down payment to the table. Further discussion with the daughter showed that her income was fine but also revealed that the down payment would be coming from cryptocurrency.
This was actually our first experience with using crypto for a down payment. We treated it like any other investment and began to collect all of the documentation possible (e.g. account statements, deposit history, transfer history in the crypto account, as well as the coinciding bank statements). Unfortunately, we found a disconnect in the information between the crypto and bank account documents. We couldn’t get the documents to align because the crypto platform uses a numbering system instead of a name for the account and a short form of the account holder’s name. In other words, there was no available profile description to prove ownership.
Unlike bank accounts — where we can see names and account numbers — and can ask the bank for a customer profile to connect the dots, we could not do so with the crypto funds. Another challenge was the number of deposits coming from different people not involved with our purchase (i.e. multiple people were supplying deposits to the crypto account). Eventually, since those dots could not be connected, the lenders refused to use the crypto funds and the deal couldn’t be done within the conditional period. In a case like this, the key is to cash out the money and let it sit in a bank account well in advance of your purchase.
On the other hand, we had a client who did well investing (early) in cannabis stocks. Jamie was a third-year plumbing apprentice looking to buy his first home. He had a direct-invest account with his bank and had earned substantial returns on his initial $5K cannabis stock investment. In his case, the documentation was simple as we could get quarterly reports from his bank. We simply matched the deposits and withdrawals from his chequing account with his investment account.
Since it was easy to match names and account numbers, this was a much simpler example of how clients can legitimately use their investment gain for a down payment. Jamie, with the income required for his mortgage approval, took the $20K he made in his investment portfolio and was able to buy his first home stress-free!
Everyone’s investment strategies are different. Contact the Kyle Miller Mortgage Agent team to have us review your investment situation and help you prepare for your mortgage application and down payment!
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