Is there such thing as a Zero-Down Mortgage?
Yes, in Canada it is still possible to finance 100% of a property's value if you know the rules and criteria. Here's an illustration of how a zero-down mortgage works today.
In Canada, the current maximum financing available on a property is 95% of the purchase price, meaning you must come up with the other 5% plus closing costs. However, it is possible to borrow or otherwise acquire the minimum down payment of 5%, and that is the trick.
While not widely known, there are a handful of lenders that will in fact give you two loans: one is the mortgage amortized (paid back) over 30 years and the other is the down payment, to be paid back over 5 years. Note: If you cancel the mortgage contract (sell property) before the 5 years is up, then you must repay the remaining down payment loan as well as the mortgage balance. Typically, the two payments are blended together as one. The other option is to borrow the down payment portion from your bank (perhaps as a line-of-credit) or from someone else *not related* to the sale of the property.
Here are the general guidelines to get approved for this type of product:
1) You must have a credit score of at least 650 (each lender has their own specific criteria, but generally nothing worse than one month late payment on any credit cards in the last two years, no late payments on any loans or mortgages and definitely no bankruptcies in the last 7 years or OPD)
2) Lenders like to see stable employment, for example 2 years in the same line of work and minimum 6 months with a new company
3) You must still have 1.5% of the purchase price cash from your own resources for closing costs (appraisal, legal fees, property tax adjustments, etc.)
If you don’t quite have enough for a down payment today, then this mortgage product may be for you. If you almost have enough for your down payment, but not quite enough for closing costs, moving expenses, furniture, or to consolidate some debts first, this product also works well. If your credit is not quite there and you just can’t wait, rent-to-own might be an option to explore as well. Don’t forget, an immediate relative can also give you the down payment as a “gift”.
You may be closer to home ownership than you think! Click here to explore the zero-down option.