Zero Down Mortgage

By David Alberda
As regulated in the past, home buyers must now come up with least a 5% down payment in order to buy a home since the Government of Canada no longer insures Zero Down Mortgages. However, there is still a Cash Back Mortgage product that is offered in which the 5% down payment would be lent to the purchaser through a lender.
 

For the home buyer, this is similar to the traditional zero down mortgage, except that a higher interest rate would be applied to the product and over the next 5 years the 5% would be paid back to the bank. As a result the home buyer will have immediate equity in the property contrary to a zero down mortgage in which the purchaser would have negative equity in the home if the property did not appreciate in the first few years. With interest rates at the lowest they have been in 50 years, this is a great way to stop renting and take advantage of the buyer's market.
 

For example,
If you put an offer on a 200k condo, here are the steps.
 

1. Bank lends 5% or $10k as a down payment. Your payments would be roughly $150 a month on that in order to pay back the bank over the next 5 years. Your interest rate on that works out to roughly 5%.
 

2. Bank gives you 190k mortgage for the condo and the payments are roughly $$950 a month. The interest rate is around 4.5%.
 

3. The bank puts both payments together so you only pay one monthly payment of $1100.
 

4. You still need to show the bank you have 1.5% of the purchase price in the bank in order to pay for lawyer, moving etc.
 

 

 

 

 

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