0% DOWN PAYMENT IS BACK! Is This Program Right for Your Clients?
Default insurance premiums for this non-traditional down payment is slightly higher at 4.5% vs 4.00% for traditional down payment sources. It is easier for your clients to work directly with the bank when applying for this program. The reason is because a mobile mortgage specialist at the bank can oversee both the loan application and the mortgage application. If the clients work with a broker, he or she will need to refer the loan portion to a bank employee, which means your client will be dealing with two people, the broker for the mortgage and the bank for the loan. This is more complicated than a one-stop shop here at RBC.
CMHC, Genworth, and Canada Guarantee reintroduced the Borrowed Funds program for down payments. That means that your clients can now get a house even if they have not saved the minimum down payment. The way this works is the bank will lend the minimum down payment amount required via a loan, and lend the rest of the amount via a mortgage. For example, if the client is buying a home for $500,000, the minimum down payment is 5%. The client would come to the bank and we would do a loan for $25,000 and a mortgage for the rest. The clients debt to income ratios have to be within standard guidelines taking the loan payment into account. The loan can also be used to consolidate debts that the client has and that will improve the client’s debt to income ratio and cashflow.
While this is a fantastic program, it doesn’t lack complexities. If you have any questions or concerns, feel free to reach out anytime. TAKE A BREAK
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