The Flex Down Payment Mortgage: Buying a Home with No Money Down in Canada
Did you know that you can still buy a home with zero percent down in Canada? It’s true. In this article, we’ll look at what is the flex down payment mortgage and how you can still buy a property with no money down.
What is the Flex Down Payment Mortgage?
The most challenging part of buying a home for most Canadians is saving up the necessary down payment. If you live in an expensive city like Toronto or Vancouver, you may have little to no money left to save towards your down payment after paying for the essentials like rent, food and transportation. That’s where the flex down payment mortgage can come in.
The flex down payment mortgage, otherwise known as the borrowed down payment or flex down, lets you buy a property with zero percent down. Let me clarify that. It’s not actually zero percent down. It’s as little as zero percent down from your resources; instead, the down payment comes from borrowed funds.
You can borrow the money from borrowed sources, such as a personal loan, unsecured line of credit or even a cash advance on your credit card (although that’s generally not recommended due to the sky-high interest rates).
By doing this, you can own a home sooner and buy at today’s home prices rather than the higher home prices of tomorrow.
What are the Downsides to the Flex Down Payment Mortgage?
The main downside is that you have to pass the mortgage stress test. This means that you still need to be able to pass the stress test with the additional debt that you take on for your down payment.
If you have excellent income and a decent credit score, you may be able to qualify perfectly fine for the flex down payment mortgage. However, the additional debt can be enough to push your debt ratios out of whack and make you not qualify, especially if you’re buying in some of Canada’s bigger cities with higher home prices.
A better option is to get a gift from family or have a family member co-sign. If those aren’t options, that’s when the flex down payment mortgage can make sense. It comes with higher mortgage default insurance premiums of 4.50%, which makes it more challenging to qualify.
Using the Flex Down Payment Mortgage in a Smart Way
Something that’s less commonly known is that lenders accept gifted down payments from non-immediate family members under the flex down payment mortgage. That is great because all prime lenders generally require gifted down payments from an immediate family member (parent, sibling, grandparents, etc.). That means if you have an aunt or uncle that wants to gift you down payment funds, the lender would be okay with that under the flex down payment mortgage.
Unlike other forms of debt, such as lines of credit and personal loans, you wouldn’t need to include the gift from a non-immediate family member as debt, making it easier to qualify.
The Bottom Line
Does the flex down payment mortgage pique your interest and you’d like to learn more? Reach out to our mortgage experts today and we’d be happy to discuss it in further detail to see if it would be a fit for you.