Zero down payment mortgages?
We are often asked if zero down payment mortgages are possible, in short the answer is no – however within the longer answer we might find a solution that works well for you. We are here to help you purchase your new home and have several creative down payment solutions that you might find to be a great fit.
As a starting point, the minimum down payment for all clients who are purchasing a home in Canada and are being approved for a mortgage is 5% of your purchase price. This is why the short answer is NO to “Are zero down payment mortgages an option for me? ” However we do have three creative solutions for you that could allow you to obtain the down payment from other sources and there by allowing you to purchase your new home with zero down payment from your own personal savings or investments. The options are:
Borrowed down payment:
This option allows you to borrow your down payment from an outside source such as an unsecured line of credit or a bank loan. We simply approve you for your mortgage with 5% down payment listed as coming from your borrowed funds and then you provide confirmation of the funds available via the loan or line of credit documents and we are all set. The underwriting guidelines for this program are a little bit more restrictive in terms of credit score requirements and we also have to include your down payment loan repayment within our qualifying debt ratios however we have had great success approving this program for many clients over the years.
Gifted down payment:
Within this option we are able to us a gift from a family member for your 5% down payment. In terms of documentation we simply ask you and the family member who is gifting you the funds to complete a templated gift letter and then we show the gift funds being deposited into your bank account. This is really simple and we work with clients on a regular basis approving this structure.
Gifted equity for down payment:
Does one of your family members own a home that they want to sell to you and they would like to give you equity within the sale? If so, we are able to consider using this equity for your down payment for your new home. For example:
Your family member would like to sell you their home valued at $300 000, they gift you equity in the amount of $15 000 (5% of the purchase price), and we approve a new mortgage for you for the balance owing of $285 000.
The documentation for this approval is really simple as well, we simply complete an appraisal on your new home to determine the value, you and the family member complete a templated gift letter for the equity gift amount, and the purchase contract reflects the down payment as gifted equity.
It is important to note that the above three options are not offered by all lenders however we have excellent relationships with numerous banks and trust companies in Canada where these options are available to our clients. One common question that clients ask about these flexible down payment programs is “do I still receive great rates and terms?” and the answer is yes – as our client we are able to ensure you receive excellent rates and terms with all three of these programs.
We want to help you with your new home purchase and mortgage approval, we have the experience, lender relationships, and great communication with our clients to ensure your new home financing is an excellent experience. Please feel free to contact us via phone, online contact form, or by applying online.