You can still buy a home with zero down


Although zero-down mortgages – or those that don’t require a down payment – technically went by the wayside when the federal government tightened mortgage rules back in 2008, lenders and homebuyers have found ways around the rule with “cash back mortgages”. These aren’t new programs, however they were very difficult to use when posted interest rates were at normal levels in the 6.95-7.50% range.

These products are reserved for those homebuyers who have great credit and income, but have found it difficult to save the $10,000 to $20,000 required for a minimum 5% down payment. In these situations, the lender will give the client 5% cash back on closing. When the down payment is requested by the real estate lawyer, the lender will provide the funds which will then be given to the vendor.

Of course, the cash back doesn’t have to be used towards the down payment of a home. It can be returned to the buyer, provided they already have a down payment, to put into savings, towards new furniture, or any renovation projects they may need to tackle.

There is a catch for the convenience, however. These mortgages come with a higher interest rate than a typical five-year mortgage – but given today’s low interest rates, they’re still low compared to historical averages. Right now, you could probably get a cash back mortgage for around 5.29%.

To qualify for these mortgages, you also have to have decent credit – sometimes as high as a 680 credit score, but there are lenders out there that’ll accept as low as a 650 credit score. And, of course, with no down payment, your monthly mortgage payments will likely be a little higher than if you had saved the 5% down yourself.

Look at it this way, lenders “give” you the money so that you can buy your home, but they still have to get that money back.

How they get that money back without actually setting up a separate loan is by charging a higher interest rate, which is generally the posted rate (it’s the rate “posted” on the rate board at the bank).

For instance, today the average discounted wholesale five-year fixed interest rate is 3.59%, and the posted rate is 5.29%. Essentially, the difference between the two payments is how they collect the money back, which barely works out to the money they’ve actually provided to you for your down payment.

The only money that CMHC and the lenders require that you have for your purchase is that you have your closing costs saved up, which as a rule is 1.5% of the purchase price, for example if you purchase a $300,000 home you’ll require to prove that you have saved up $4,500 for your closing costs (these are the funds it takes to complete your transaction, legal fees, back taxes, etc).

There are a lot of positives to this program if you haven’t been able to save up for a down payment yet, can afford the costs of homeownership and are looking at entering the real estate market as a home owner.

Jean-Guy Turcotte is an Accredited Mortgage Professional with his partners at Regional Mortgage Corporation and can be reached for appointments at 403-343-1125 emailed to or texted to 403-391-2552.

Just Posted

Accused Jason Klaus testifies in triple-homicide trial in Red Deer

Klaus charged with three counts of first-degree murder, one count of arson

Red Deer County team honoured for aid in Waterton Fires

Red Deer County Protective Services a huge help to RCMP

Two arrested at Red Deer Rebels hockey game

Red Deer woman charged for allegedly striking police officer

WATCH: Helping those less fortunate at Christmas

Red Deer comes together to spread joy at Christmas Wish Breakfast

WATCH: Red Deerians come together to ‘light the night’

Traditional Red Deer Lights the Night sees thousands

David Cassidy, teen idol and ‘Partridge Family’ star, dies at 67

Cassidy announced earlier this year he had been diagnosed with dementia

Cost to fix Phoenix pay system to surpass $540 million: auditor general

Michael Ferguson’s review hints the entire system should be scrapped

UPDATE: CBS fires Charlie Rose following allegations

Charlie Rose is the latest public figure to be accused with sexual misconduct allegations

LGBTQ advocates want military, RCMP to take part in apology

“These are all the organizations that perpetrated past discrimination against the LGBTQ community.”

Canadians are getting bad advice from the taxman

An auditor has found that Canadians are getting bad advice from the taxman, when they can get through

B.C. mining company stakes claim in Australia

Copper Mountain is set to purchase Cloncurry Copper Project in a $93-million deal.

B.C. reporter reflects on covering Charles Manson

Charles Manson, leader of a murderous cult, died on Sunday at 83

Nebraska approves TransCanada’s Keystone XL pipeline

Nebraska’s Public Service Commission approved TransCanada’s Keystone XL route in a close vote

Most Read