Friday 10 October 2014

No down payment? No problem!

Everyone "knows" you absolutely have to have a down payment now because 100% mortgages are not available anymore, right?  Wrong!

While banks can no longer offer 100% mortgages because of restrictions on the mortgage insurance program, credit unions can.  The key difference is that banks are federally regulated while credit unions are provincially regulated, and this affects what the federally-regulated mortgage insurers can and can't do for each.  This small difference allows credit unions to use a cashback mortgage to give buyers the full purchase price at the time of closing, while banks can not.

A cashback mortgage for the full price is where the registered mortgage is 95% and then the credit union loans you the 5% down payment. There are terms in the mortgage requiring repayment of this loan if you sell of course, and the interest rate may be a bit higher -- but with where interest rates are today, the rate on a cashback is still better than the best rate was when I bought my house.

Unfortunately, the credit unions do expect their regulation to be changed and there is no definite timeframe on it, but for now these cashback mortgages as 100% financing are still available.

If you don't want to keep paying rent and have been thinking about buying a new house but don't have a down payment, get in touch with me and let's talk.  I would be happy to put you in touch with a mortgage professional who can help you explore this option.

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