Buying With 5% Down

Don’t have the usual 20% down payment? No worries — Increase your leverage with a high ratio mortgage! This consumer -oriented program makes the dream of home ownership a reality for more Canadians than ever before.

What is it?

There are two Insurance companies with programs available that let you buy a home with as little as 5% down. One is administered by Genworth Financial, a private sector insurer, and the other by CMHC – Canada Mortgage and Housing Corporation, a Federal Crown Corporation. Read carefully; the small print could create unexpected hitches! In most cases, clients with a minimum of 5% down payment will be eligible for the best discounted rates but not always!

Who is eligible?

Any qualified borrower who meets the lenders criteria for income and credit may be eligible for these programs. You do not need to be a first time buyer to qualify.

How it works

Yes, there is a new mortgage in Canada that will allow you to finance up to 95% of your new home purchase. You can also use this mortgage product to refinance up to 95% of your home’s value for renovations, debt consolidation, etc.

The mortgage is 95% of the appraised value of the property ?-You must have clean credit history and you must have good job stability Even with a small down payment you can start building equity right away!
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.

Example:

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 $1,222.09 (see Mortgage Analyzer calculator section). If your annual taxes are $2,000 and annual heating $1,200, then your annual shelter costs would total $17,865.12. Assuming no other payments, an income of $55,830 ($17,865/32%) would qualify you for this mortgage.

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 and that is where I help you determine the required criteria and assist you with the entire mortgage process. Plus I deal with many lenders and therefore have a greater chance of matching you with a lender that accepts your circumstances and gives you the best mortgage conditions under your circumstances.

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.

For more information please feel free to visit:
CMHC – www.cmhc-schl.gc.ca
Genworth Financial – www.genworth.com
Or, as always… Contact me at 604-813-4543