What are flex down (zero down) mortgages? These mortgage products allow the downpayment to be borrowed from a different credit facility. While using a credit card is allowed, it is better to use a line of credit as the interest rate is typically way lower than a credit card. The mortgage is still 95% of the price, it is just that some or all of the 5% downpayment can be borrowed. This Flex Down Morrtgage (zero down mortgage) allows you to purchase a home with little-to-no down payment.
Saving up 5% of the value of a home can be tough. On a $400,000 purchase, that is $20,000. If you have excellent credit and do not have RRSP funds to use through the Home Buyer’s Plan, you can use flex down (zero down) mortgages as an option to get your first mortgage. The rules on this product with most banks are that you cannot hold any other current mortgages when applying for this option. You may have held mortgages in the past but cannot have any mortgages right now. Additional rules include:
Based on the above, if you think you might qualify for flex down (zero down) mortgages, a mortgage broker can help you find out. Some lenders will not let you borrow the full downpayment. When you use a mortgage broker, they can search high and low for the exact terms that you need.
For Flex Down (zero down) mortgages, the downpayment required is 5% on homes up to $500,000, and then 10% of any amount over the $500,000. For example, the downpayment on a $600,000 home is $35,000. ($25,000 on the first $500K, then $10,000 on the extra $100K). For this same example, the $35,000 could be borrowed on a line of credit, and then the mortgage can get approved through the Flex Down Program. These types of mortgages do require mortgage default insurance. It is also VERY important that you do a budget, as you have to pay off the line of credit or whatever you use to borrow the down payment. These factors need to be considered in your budget and home purchasing plan.
The flex down mortgage can put you and your family in a home much sooner than it will take you to save up the cash for a traditional downpayment. On a typical $300,000 mortgage, approximately $10,000 gets paid off each year. So instead of paying rent, start paying off your own house. You can also use this type of mortgage if you have part of the downpayment amount, but are just a bit short. Talk to your mortgage broker today to see how they can help you stretch your home buying dollars and be in the home of your dreams today.