If there is not enough equity then you would need to put a down payment for the blended mortgage amount needed to close your new home purchase.

$696 monthly

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Back in 2005 i became disabled due to an accident. waiting on odsp and cpp disability, i was put on ontario works. i signed an agreement saying any money i get will be paid back to them. on january 2007 odsp approved me and sent me a backpayment from januaury 2006 to 2007. which was paid to ontario works. cpp approved me in june 2007 and also sent me a backpayment from may of 2005. this paid back ontario works and ontario disability. i never seen any money from these backpayments. cpp now sent me my t4 slip which adds the entire amount from may 05 to december 07. even though the only money i seen was from june 2007 to december 07. is there a way to deduct this? i'm worried because they only provide me with enough to live on (barely) and if i declare the full amount i have about $3000 in taxes i have to pay (if my math is right) worse the money i received from ontario works was also taxed in 05 and 06. so if i can't deduct then am i not paying tax twice on the same amount?

No you can't deduct the amount. The amount was received in 2007, so it is taxable in 2007. As for your concern about repayment of the taxes, work with CRA on the repayment. File on time to avoid a late filing penalty and apply for taxpayer relief to take care of the interest because of your disability and the financial hardship you are in.