The skinny on the state of Zero down.

I have heard some of my friends say that Zero Down Mortgages are gone. 

I replied, historically where there is a demand, there will be some supply.

Being the cultured Calgary Mortgage Broker I am I refrained from talking about this over dinner, but I thought I should put this out there for not just them, but for you too.   

Try as they may to put road blocks and put an end to Canadians buying homes with nothing down, homeowners are still getting into the real estate market without building up a nest egg first.

The First Road Block in 2008- Ottawa terminated mortgages that are insured with 100 per cent financing.

Home buyers found the work around by cash-back down payment mortgages. With the trade-off of a higher rate the lender will give you your 5 per cent needed for the down payment.

The latest Road Block in 2012- Ottawa terminated Banks from being able to offer cash back for down payments.

This has stopped some, but now there are ways potential home owners are finding to allow them to get this 5% needed so they can get into the market without building up that nest egg. Here are the ways that are being used to accomplish this goal.

Solutions:

• Government programs

For clients that can prove low income there are companies like Attainable Homes Calgary who provide down payment assistance.   You still need good credit.

• Getting a cash-back down payment mortgage

Lenders that are not federally legislated like credit unions for example can still offer cash-back down payment mortgages. You still have to cover closing costs though!  If you break early from these the lender can reclaim the cash that was given at the start.  The rates are higher, for these but the advantage of the cash upfront goes a long way to offset the increased cost. This is most definitely not the lowest mortgage rate available.

• Borrowing from other credit sources.

 

Clients are able to borrow the down payment from a line of credit, personal loan or even a credit card. That’s right; if the criteria is meet, raising the debt levels with use of a MasterCard or  VISA at 19.25%  We just have to make sure that the lender allows is and they are not a bank or federal trust company.   Just be mindful that the cost to borrow that down payment is far greater, and should be paid off quick and fast.

• Getting a gifted down payment- only to repay it.

I am unable to endorse this.  However it’s my duty to explain how it’s taking place. 

Numerous banks are still offering the flex down, which they pay out cash after the mortgage, has closed.  If a potential buyer has an immediate family member gift  the funds they can be paid back after the deal closes. We are talking a parent, grandparent or brother or sister, not a cousin here.   Or if the family member is ok with a little under the table loan, the GIFT gets paid back over the next year.  The lender does not have the resources to check your bank records for the next year to ensure that no payments went to who gifted it in the beginning.

• Home Buyers Plan (HBP RSP)

First-time buyers can use no more than $25,000 from their RRSP as a down payment.   Which means you are borrowing against yourself and paying yourself back over an extended time.

Before March 1^st is highest circumstance of the Investment loan tax rebate plan.  To which you get an Investment loan from a bank, purchase a RSP with it, claim in on your income tax, get a nice refund then apply against the loan of to the down payment, then when the 90 days deadline is up redeem RSP for your down payment.    Make sure that you are still within your ratios.

There are always negative and positives to every choice, if you choose to partake in any of the above plans don’t do so without ensuring you have planned it all out.   You don’t want to be left outside in the cold, when you could have been in warm by the new fireplace. Call A Calgary Mortgage Broker if you have any questions.   403-807-8779