Down Payment Assistance Option Download Guide

Down Payment Assistance Option

Option 1: Borrowed Down Mortgage
This is a mortgage product where you can use a credit source (Credit Card, Line of Credit or Personal Loan) The lender will accept money pulled from the credit source as your down payment funds.

Details:
  • Mortgage lenders will need to see you can afford the new housing cost, any present monthly payments you already make plus the new payment on the borrowed funds 
  • You will still get the best mortgage rates and terms available.
  • You must have a credit score minimum of 650
  • Lenders also want to see that you have secure fulltime employment
  • If you do not have a credit sources available we can connect you with a branch employee or you can obtain them with your local chosen bank/credit union
  • The key is making sure we aren’t over leveraging you and that all costs are going to be affordable and you not feel house poor.

Situations where this has worked well:
  • If you have great income but just haven’t had enough time to save
  • 2 Income households: to be able to pay down the borrowed funds faster
  • If you work in a field or trade that shows great promise for large raises in the future
  • If you are coming out of a divorce, separation and want to get back on your feet ASAP
  • You have an employment with large bonuses, commissions or period of time with lots of overtime/increased income.

Option 2: Cash Back Mortgage
This is a mortgage product where the lender provides you a cash credit at closing based on the sized of
your mortgage loan amount

Details:
  • You will still need to show that you have the 5% down payment. Sources of Down Payment can be: RRSP for first time buyers, saved funds, gifted funds, sale of an asset.
  • Because the lender is giving you cash back after you get keys to your new home the interest rates are higher in order to recoup that cash over the next 5 years.
  • Range is 1-5% cashback – higher % granted generally means higher interest rate
  • you must take a 5 Year fixed term for these types of mortgages.
  • Once your first 5 year term is completed you are eligible for the normal best low rates for your mortgage. The first 5 years is the only higher interest rate term.
  • Funds given in a cash back mortgage will be clawed back if you pay out the mortgage earlier than the committed 5 year term. This is normally a prorated number based on how many of the 5 years you have paid for
  • Cash back funds can be used to pay for legal fees, moving expenses, furniture, utility hookups, debt paydown, vacations etc. It’s up to you!
Situations where this works well:
  • If you do not have any funds for furnishing/moving and do not mind the slightly higher interest rates
  • You do not want more than 1 new payment to make
  • When you plan to say in the home for 5 years or more.
Option 3: RRSP Loans
This is an investment loan granted by your bank or credit union where funds from the loan are specifically used to be deposited into an RRSP account. The advantage of these accounts is that deposited funds are eligible for tax breaks by CRA. Funds from an RRSP account can be used with the First Time Home Buyers Plan also supported by CRA.

Details:
  • An RRSP is a Registered Retirement Savings Plan.
  • RRSP monies can be pulled by qualified first time home buyers as a down payment a minimum of 90 days after deposit
  • Select lenders will allow withdrawal of the funds BEFORE the loan payment complete (Conditions Apply)
  • You will still be eligible for the best mortgage rates & terms available
  • You must contribute the funds withdrawn over a 15 year period back into your RRSP Account
Situations where this works well:
  • First time home buyers or if you have not owned a home in the last 4 years
  • Wanting a more manageable monthly payment vs borrowing funds from a credit source
  • Income tax credits can pay down a portion of the loan taken (See Cheryl for more details on tax advantages of RRSP contributions/loans)
What do you need to qualify for a mortgage of this sort?
  • Good Credit – Minimum 650 score plus 2 sources minimum 2 years and $2,000.00 limit
  • Full time employment, out of probation
  • 2 Full Tax Years history of self employed showing a personal income high enough to qualify
  • Permanent Residence: Either born or raised in Canada or have obtained permanent status.