No money down mortgage in Canada?

Wait a minute, I thought that the government took away 100% financing in Canada – they did, sort of – what they did not take away was your opportunity for a no money down mortgage.  Doesn’t this sounds like Barack Obama style political double talk? Yes, but I will explain the semantics along with your options below.

No money down mortgage options:

The government has limited CMHC to a maximum lending amount of  95% loan to value.  This leaves us with two solid options:

• Free down payment mortgage: this is a 95% mortgage with 5% cash back from the lender.  The advantage is that it affords us a one step option.  The disadvantages include limited terms, potentially higher early payout costs, and higher rates as lenders will charge their five year fixed posted rate.  This rate is typically 1.3% to 2.0% higher than the best discounted five year fixed rate.
• Flex down payment mortgage: this is a two step process where we are allowed to borrow our client’s down payment from an unsecured lending source.  We proceed with a 95% mortgage and then often 5% down payment from an unsecured line of credit with interest only payments.  The advantage is we are able to offer all best rates and terms including fixed and variable mortgages.  Additionally the cost for early mortgage payout is the same as a regular 5% down mortgage.  The only disadvantage for this product is that it is a two step process where by we have to obtain the client’s mortgage approval in addition to an unsecured line of credit.

Additional no money down mortgage thoughts:

We will almost always strive to complete the flex down option for our clients as it affords significantly better interest rate savings and options.  However, for clients that are purchasing their home with a long term view, receiving a free down payment from the lender for their purchase and being charged a premium on their rate for it is not a bad deal either.

As the Canadian mortgage industry continues to reinvent inself more often than Madonna, I wil be with you, helping you to see behind the curtain and cut through the lender smoke to see the truth and your true options.

If you or your family or friends are considering a no money down mortgage please feel free to contact me so that we can ensure you receive the best fit your your new home purchase.