Flex Down Payment Mortgage – 0% Down
With a flex down payment mortgage, you can purchase a property with zero percent down.
However, it’s important to note that the down payment is not actually zero percent. Instead, it involves leveraging borrowed funds to cover the down payment.
These borrowed funds can come from various sources, including personal loans, unsecured lines of credit, or even a cash advance on your credit card (although caution is advised due to high interest rates).
By utilizing this approach, you can become a homeowner sooner, enabling you to buy at today’s home prices instead of potentially higher prices in the future.
Downsides to the Flex Down Payment Mortgage
While the flex down payment mortgage presents an appealing option, it does come with some downsides. The primary consideration is that you still need to pass the mortgage stress test.
This means that you must demonstrate your ability to handle the additional debt incurred for the down payment.
If you have a reliable income and a decent credit score, you may qualify for the flex down payment mortgage without issues. However, the additional debt can disrupt your debt ratios and hinder your eligibility, especially when purchasing properties in high-priced cities across Canada.
Ideally, it is preferable to explore alternatives such as receiving a gift from family or having a family member co-sign.
If those options are not viable, the flex down payment mortgage can be a viable alternative.
However, it’s important to note that it comes with higher mortgage default insurance premiums, typically at 4.50%, which can pose challenges during the qualification process.
Utilizing the Flex Down Payment Mortgage Strategically
One lesser-known advantage of the flex down payment mortgage is that lenders accept gifted down payments from non-immediate family members. This is a significant benefit because most prime lenders typically require down payments to be gifted by immediate family members (such as parents, siblings, or grandparents).
Under the flex down payment mortgage, if you have an aunt or uncle willing to provide you with down payment funds as a gift, lenders will accept it.
Unlike other forms of debt like lines of credit or personal loans, you won’t need to include the gift from a non-immediate family member as debt when calculating your eligibility.
This exclusion can simplify the qualification process, making it easier for you to secure the flex down payment mortgage.
Conclusions and Further Thoughts
The flex down payment mortgage offers a glimmer of hope for prospective homeowners in Canada who find it challenging to save for a down payment. By leveraging borrowed funds, it enables you to purchase a property with zero percent down, allowing you to enter the real estate market sooner.
However, it’s important to consider the downsides and implications, such as the need to pass the mortgage stress test and the higher insurance premiums.
Exploring alternatives like receiving gifts from family or having a family member co-sign is recommended before opting for the flex down payment mortgage.
Remember, homeownership is a significant financial commitment, and it’s essential to carefully weigh your options and seek expert advice to ensure you make the right decision for your unique circumstances. Contact Huber Mortgage to discuss your plans – Click HERE
PS – One of my hobbies is blogging about mortgages, debt and government policy. During the day I’m a MORTGAGE BROKER in Kelowna, BC!
Check out the Huber Mortgage Home Buyers Guide HERE