GMS said:
I have a query regarding Proof of Funds.. For better clarity, i give below example.
(a) Bank balance: 45,000 CAD
(b) Total outstanding amount of house loan: 40,000 CAD - Long term liabilities
(c) Annual installments amount: 5,000 CAD - Short term liabilities
(d) Total value of asset (only house): 45,000 CAD
In this situation, should we deduct total outstanding amount of house loan (b) from bank balance(a) to arrive to settlement fund..? or we have to deduct only annual installment amount (c) - which can be categorized as short term liabilities for this purpose...?
There is a huge difference between both the case. I have ignored other funds which can be shown in settlement fund.
In this example your assets are bank balance plus house value, 90,000 CAD.
Your liabilities are house loan plus whatever you need to pay on annual installments. I don't know what annual installments are or how many you have.
Your settlement funds are probably the same as your bank balance, 45,000 CAD.
The way your settlement funds might be less is if any of your liabilities create an encumbrance on the bank balance.
Consider this: if you stopped paying your home loan, what would happen? The bank would kick you out of your house and take it back. But could they take the cash in your bank balance? If the answer is no, the home loan is not relevant to your settlement funds calculation. Of course I don't recommend defaulting on your home loan, but the point of the settlement funds calculation is to consider whether the liability can reduce the amount of cash or cash equivalents if it is not paid.
On the other hand, if the terms of any of your liabilities require you to maintain a minimum bank balance, whatever the minimum is could not be considered settlement funds because they can't be withdrawn and carried with you to Canada.
Good luck!