Buy With '0' or 5% Down

Don't have the usual 20% down payment?

No worries — Increase your leverage with a high ratio mortgage! This consumer-oriented option makes the dream of home ownership a reality for more Canadians than ever before. 

What is it?

5% Down: Programs let you buy a home for as little as a 5% down payment are available from privte sector insurers such as Genworth Financial and Canada Guaranty and CMHC, a federal crown corporation. If you are uncertain if you will qualify or need guidance through the mortgage process - contact an Invis Mortgage Consultant.

Free-Down Payment: Some of the lenders with which Invis deals have programs which are referred to as "Free-Down-Payment" Programs. In these scenarios, the rate is higher than the discounted rate, and is closer to - if not the actual - posted rate. The lender essentially provides you with a cashback of 5% which is the downpayment. The higher rate of interest paid over the mortgage term compensates for the downpayment covered by the lender.

How it works

These programs allow you to obtain a mortgage of up to 95% of the purchase price. Depending upon the percentage of down payment to be used, CMHC, Genworth Financial or Canada Guaranty charge the following one-time insurance premium to you, the borrower. This premium can be added to the mortgage without affecting the Loan To Value ratio (LTV).

Down Payment =	% Financing	Insurance Premium
	(as % of mortgage amount)	(calc. from mortgage amount)
5 - 9.9%	90.1% - 95%	2.75%
10 - 14.9%	85.1% - 90%	2.00%
15 - 19.9%	80.1% - 85%	1.75%
20 - 24.9%	75.1% - 80%	1.00%
25 - 34.9%	65.0% - 75%	0.65% (special circumstances)
35% plus	Up to 65%	0.50% (special circumstances

In the example given above, the mortgage of $178,000 would be subject to a 2.0% Insurance fee because it is 89% of the purchase price. The fee would be $3,560, and the total mortgage amount $181,560. To qualify for a CMHC insured mortgage:

• your monthly payments for "shelter costs" (mortgage principal and interest plus taxes and heating) must be no greater than 32% of your gross pre-tax family income.
  
  
• your monthly payments for all obligations — shelter costs plus loan, lease and credit card payments, plus alimony etc. — must not exceed 40% of your gross pre-tax family income.
  
  
• the payments on your mortgage must be calculated using the 3 year rate (5 year rate for the 5% down program).
  
  

Example:

1. If the best 3-year rate you can get is 6.5%, the monthly payment on the $182,450 mortgage shown above — at a standard 25 year amortization — is $1,216.13 (see Mortgage Analyzer calculator). If your annual taxes are $2,000 and annual heating $1,200, then your annual shelter costs would total $17,794.Assuming no other payments, an income of $55,605 ($17,794/32%) would qualify you for this mortgage.

2. If you have monthly car and credit card payments of $475.00, this would add $5,700 to your annual debt servicing, for a total of $23,565. Dividing this figure by 40% (see above) gives a required qualifying income of $58,900.

What else should you know?

In general, the credit status of an applicant must meet the lending criteria of the particular mortgage lender. An Invis Mortgage Consultant can help you meet the required criteria and assist you with the entire mortgage process. Plus we deal with many lenders and therefore have a greater chance of matching you with a lender.

Also, while CMHC will qualify an ex-bankrupt applicant for insurance two years after discharge with subsequent re-established credit, many lenders' own rules over-ride this feature, and they will decline the application.

On the other hand there are a number of lenders who specialize in granting and administering mortgages to the full extent of the National Housing Act at competitive interest rates.

In addition to the slight differences described above in mortgage terms and qualifying ratios (Total Debt Service ratio cannot exceed 40%) there are a few important conditions which apply to eligibility under this program:

• The downpayment must be 5% of the purchase price.
  
  
• The applicant must be able to prove that their down payment comes from their own resources — savings, sale of investments, etc., the exception being a family gift that never has to be repaid, and which is in the borrower's possession before the application for Mortgage Loan Insurance is sent to CMHC.