A number of lenders still give borrowers 100% of purchase price funds to purchase a primary residential home. It is called The Free Down Mortgage Program. Up until three years ago 100% mortgage financing was widely available in the mortgage financing markets. The Canadian Government then put the brakes on that product. Since then Mortgage lenders have being able to find ways to give borrowers 100% of purchase price (insured by CMHC) without breaking the 5% minimum down payment rule. It works like this.
Rather than the client actually borrowing the 100% mortgage funds required, the borrower gets approved for 95% financing. The borrower then receives a 5 year fixed posted rate mortgage (today 5.29%) rather than a 5 year fixed discount rate or variable rate mortgage. By given the client a 5 year fixed posted rate mortgage the lender can then give back 5% cash to the borrower. These funds are then given to the lawyer to act as a 5% down payment on closing. There you have it.
Considering that the average 5 year discount rate three years ago was averaging 5.50% to 6.00%, 5.29% for 5 year fixed today is still a good interest rate.
So if you want to purchase a new home but just don’t have the 5% down payment there is a mortgage product out there that can help you get into your home. Good credit is essential.
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