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Real Estate Knowledge Center:

Five Per Cent Down Payment Program

With as little as five per cent of the purchase price, all home buyers now have access to mortgage insurance enabling then to enter the housing market, as long as you can manage the costs of home ownership.

Details

  • Mortgage insurance for 95 per cent mortgages is now available to both first time and repeat home buyers.
  • Buyers using the Program may consume up to 32 per cent of their gross family income for payments of principle, interest, property taxes and heating, and total debt load cannot exceed 40 per cent of family income.
  • Insurance premiums on loans above 90 per cent of the lending value of the house will be 3.75 per cent of the mortgage loan. This premium can be added to the mortgage.
  • Price restrictions include a $300,000 ceiling on homes purchased in the Greater Toronto Area.
  • The maximum amortization period is 25 years.
  • Borrowers are required to demonstrate, at the time of application, their ability to cover closing costs equal to at least 1.5% of the purchase price.
  • Where the minimum equity requirement is being met by way of a financial gift, the funds must be in possession of the borrower 15 days before making an offer to purchase.

For more information call CMHC at 416-221-2642

Canada Mortgage and Housing Corp. will sweeten the deal for those Canadians looking to take advantage of low interest rates to purchase a home.

Starting March 1, CMHC will relax rules regarding minimum down payments on a home and what form those down payments can take before a home buyer qualifies for mortgage insurance from the federal agency.

Previously, CMHC mandated a minimum five per cent down payment in order to purchase mortgage insurance. The down payment had to be drawn from savings or from RRSP withdrawals in order to qualify. Effective March 1, the down payment can come from any source, such as lender incentives and borrowed funds, the agency says. However, borrowers will still have to prove their ability to meet their debt requirements in order to qualify for mortgage insurance.

"The new Flex Down mortgage insurance product responds to the changing nature of the housing market,” said Andy Scott, Minister of State for Infrastructure and Minister responsible for the CMHC. “With the Flex Down product, purchasers, most notably first home buyers, will now be able to access a wider variety of sources for their down payment.”

GE Capital Inc., the other national mortgage insurer, already has a similar plan in place.

The rate charged by CMHC to insure mortgages under the new system will be higher than that charged to those who make larger down payments. CMHC will charge 3.4 per cent of the value of the mortgage for a down payment of less than five per cent, 3.25 per cent for five per cent down payments, two per cent for those making a 10 per cent down payment, and 0.65 per cent for those making a 20 per cent down payment.

Under the new product, lenders will be able to offer Canadians a variety of mortgage product offerings including mortgages with terms as low as six months and fixed, adjustable and capped interest rate loans, CMHC says. (CREA 24/02/2004)

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