If you’re wondering why government backed zero down mortgages have been cancelled in Canada, it all goes back down to the Sub-Prime crisis in the States. With the demise of several alternative lending products in Canada in the last year, we were surprised to see the end of zero down and 40 year amortizations. Not to fear, however, there are still some options available to you.
Whether you are a first time buyer who does not have a sufficient down payment or you want to use your own funds for other purposes, consider these options.
5% FREE Down Payment
This is NOT a ZERO DOWN Mortgage, instead the lender actually GIVES you 5% down, resulting in a mortgage that starts out at 95% LTV + applicable insurance premiums.
The terms of this mortgage are the following:
- Purchases Only
- Minimum Credit score – 680
- Up to a 35 year Amortization
- Must show 1.5% in closing costs available – lender needs to confirm you have additional funds available for legal fees, moving, unforeseen events, etc.
- Five year fixed rates, based on POSTED rates, not discounted
- 5% cash back based on the entire purchase price, will be advanced at closing to use for down payment.
5% Borrowed Down Payment “Flex Down” Mortgage – this is another alternative that you can consider
Offered through CMHC:
The terms of this mortgage are the following:
- Purchases Only
- Minimum Credit Score – 650
- Up to 35 year Amortization
- Must show 1.5% in closing costs available – lender needs to confirm you have additional funds available for legal fees, moving, unforeseen events, etc.
| Advantages to Borrowed Down: Gives you up to 100% financing Down payment will not be amortized with the mortgage, potentially saving money in interest charges |
- Fixed and variable rates are available
Borrowed down payment can come from any source – credit cards, loans, unsecured lines of credit; must be able to qualify with debt service ratios including this borrowed down payment
*CMHC Premium is 2.9% – add an additional .20 per 5 year increase in amortization
For example:
Based on a $200,000 mortgage – CMHC Premium is $5,800 rolled in based on a 25 year amortization. If you want to increase your amortization to the maximum 35 year amortization, it would be calculated like this:
$200,000 x 2.9% + .4%= 3.30% $6,600 premium rolled in