No Down Payment or Zero Down Mortgages in Canada

If you have an excellent credit rating and stable income, you may qualify to purchase a property with no down payment using a "cash back" mortgage.  All you need to provide is enough money to cover your closing costs and moving expenses (about 1.5% of the purchase price). 

Cash back mortgages work by having the mortgage lender provide you, the borrower, a certain sum of money upon funding of the mortgage.  The amount you receive is based on a percentage of the mortgage amount or purchase price and typically ranges from 1% to 7%.  

The minimum down payment required is 5%, so therefore the lender provides you with a 5% cash back that is payable to your lawyer on closing and this along with your 95% mortgage financing, equates to purchasing a property with no down payment.  These are called cash-back or free down payment mortgages and can make home ownership an affordable reality sooner thank you think.    You pay back the cash back amount over the period of the mortgage by way of a higher interest rate which equates to you borrowing your down payment.

They are perfect for you if you have:

As a specialist in this unique area of financing, I can walk you thru the nuances of each type of of cash back or no down payment mortgage available – I'll explain the pro's and con's to ensure it is a good fit for you. 

Here are some examples and different scenarios for you:

As mentioned before, this is in essence 100% financing.  5% of your purchase price is provided by way of a cash back and then a mortgage for 95% of your purchase that, that is given to your lawyer on closing of the home.  The lawyer then uses this as your down payment and the cash back is reflected in your interest rate.  Remember that you still have to find closing costs as well as have enough cash to put a "deposit" down on the Offer to Purchase.  Any deposit you put down on your Offer to Purchase is refunded to you, after closing costs, at the lawyers office on your closing date.

The interest rate is typically around posted rates however, we often have rate "specials" and discounts with some lenders as a specialist in this unique area of financing.

This is slightly different to a cash back in that you can borrow your  down payment from a line of credit, credit card or personal loan.   You can even use "sweat equity" or gifts from arm's length parties instead.  With good credit and stable income, your interest rate will be fully discounted, unlike the cash back mortgage.

So may you just need a smaller amount by way of say a 2% cash back and not the full 5% down payment, then this is the perfect mortgage for you.  You receive up to 2% cash back on the mortgage to help with the balance of the down payment, furniture or even closing costs…. Maybe a nice holiday or honeymoon!.  You may even want to use the money to help pay off some outstanding debt for when you move into your new home.  This is the middle ground when it comes to rates with just being slightly higher than fully discounted rates. 

When you are looking for an Ontario zero down mortgage, make sure to speak to a mortgage agent that specializes in this product, like award winning Claire Drage.