There are two significant benefits and costs associated with a 0 down mortgage where the down payment is borrowed. The two benefits are: time saved and home equity. Depending on your personal situation, it may take several years to save up the full down payment. While 'time saved' is an intangible benefit, it’s certainly a bonus to own a home of your own years ahead of schedule. The second benefit of the 0 down mortgage is equity earned via home appreciation and principal pay down of your mortgage, a tangible benefit that would otherwise go to one’s landlord.
The two primary costs of the borrowed down mortgage are Canada Guaranty’s slightly higher insurance premium, and the additional interest cost from the down payment.
This is the estimated amount of home equity you may gain - or miss out on - during your down payment savings period. We used average inflation of 3% to calculate the home appreciation.
This is how long it will take you to save up the full 5% down payment or, on the flip side, the benefit of owning your own home years sooner even with zero down payment.
For every $100,000 borrowed Canada Guaranty charges a slightly higher, one-time premium of $250 for the Flexible down payment mortgage.
This is the cost of the borrowed 5% down payment, as the bank and seller of the property will still require a deposit, this amount is calculated using a rough interest rate of 7% over five years.
Discover how this 0 down mortgage program works, the benefits, the restrictions and more. As we say, why read when you can watch a video. On that note, the animated rolling human is supposed to be a rolling piggy bank. Not sure what our animators were thinking to be honest.
When you click on the 'Contact Us' button, we’ll collect not only your information but also ask you 'How you would rate your credit'. This information is then forwarded to a mortgage broker for review, and within a few minutes they’ let you know what your 0 down mortgage options are based on your down payment and credit. If it appears you qualify for the 0 down mortgage program we’ll invite you to forward your income confirmation and information so we may verify your income, credit and ulitmately what purchase price you might qualify for.
Since you don't have the down payment saved we will have to provide you with one, and for that we will guide you to set up a loan or interest only line of credit for the deposit. This borrowed down payment will be flexible and as you would have saved up for the down payment you simply pay this amount off instead - the bonus is you are already living in a home of your own.
This is partially correct, prior to the Government of Canada’s mortgage legislation change of 2015, the major banks offered a Cash Back 0 down mortgage. With this type of mortgage the bank provided the down payment but then charged a significantly higher interest rate on the mortgage. The effective interest rate of that borrowed 0 down payment was anywhere from 18% to 25% - an extremely expensive options in our opinion.
However, the legislation change of 2015 effectively eliminated the cash back mortgage, which was good news for first-time home buyers who were unaware they were paying so much for this type of 0 down mortgage. What was left after the chance was the Flex 0 down mortgage program - this allowed the home buyer to borrow their down payment using a loan or line of credit. At interest rates of 4% to 8% this type of 0 down mortgage was far less expensive than the bank option. In the end, most Canadian Banks discontinued their flexible down payment programs save for a few - and we have access to all of them. Contact us for help in setting up a 0 down mortgage.