Is there such thing as a Zero-Down Mortgage?

(Last updated 2019)

Zero down mortgage

Yes and No. In Canada it is still possible to finance 100% of a property's value if you know the rules and criteria.  BUT... you need excellent credit history and reliable employment. Here's how to purchase a home with zero-down payment.

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% in order to synthesize a no down payment mortgage

Prior to October 31, 2012, there were a handful of lenders that would give you cash-back-for-down-payment, and roll that extra money into your mortgage and recoup it by charging you a higher interest rate over a 5-year term - but that option is now gone. The remaining option (still available as of April 1, 2019) is called Flex Down, which is the option to borrow the down payment portion from your bank (perhaps as a line-of-credit) or from a lender or someone else *not related* to the sale of the property. Ask us for suggestions, as we may be able to help.

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. If your hours are not guaranteed, then you need 2 year earning track record with your employer.

3)      You must still have 1.0 - 1.5% of the purchase price cash from your own resources for closing costs (appraisal, legal fees, property tax adjustments, etc.)

4)      The target house price is less than $600k and no more than 4x your gross annual taxable income.

This borrowed down payment program is for home buyers who have established an excellent credit history, but have not yet saved the required down-payment or have chosen to use their savings to build assets in different ways.

This mortgage strategy may be for you if you don’t quite have enough for a down payment today or you almost have enough for your down payment, but not quite enough for closing costs, moving expenses, furniture, or to consolidate some debts first.

Canadian Child Tax Benefits and income from a non-residing immediate family member (co-signor) can be used to help qualify. An immediate relative can also give you the down payment as a “gift” and there are still cash-back-mortgages, they just can't be used to prove your down payment. What you do with the cash after is your call. 

You can read more on how the borrowed down payment mortgage program works here and the various personal loans for down payment here.

You may be closer to home ownership than you think!  Click here to discuss the zero-down option further if you have a good job, not too many other debts, and reasonable credit. If you're not sure, learn whether you can get a mortgage here.

Topics: Buying a home, Down Payment, Assistance Programs