Many people wonder whether it’s possible to secure a mortgage without a down payment, and our finance experts are here to help clear up any misconceptions.
Here’s what you need to know about this type of mortgage.
Can You Get a No Down Payment Mortgage?
Yes, it is possible to get a mortgage without a down payment comprised of your own funds. However, it’s important to understand that this doesn’t mean there is no down payment. We’ll elaborate on this below.
How Does It Work?
A no-down payment mortgage means that you won’t have to use your own cash for the down payment. Instead, you’ll borrow the down payment amount from your lender, who will also fund your mortgage.
However, you will still be responsible for paying the standard closing costs, which typically make up 1-2% of the total purchase price. These costs can include legal fees, title insurance, mortgage default insurance, land transfer tax, and more.
To be eligible for a no-down payment mortgage, you’ll need to meet several conditions. These include having a stable income, a good credit score, and the ability to repay your mortgage and other living expenses.
It’s also important to be financially prepared for any loss of income that may occur during the repayment period.
Here are a few important things to keep in mind before applying for a no-down payment mortgage in Canada:
You may need to look for alternative lenders if you can’t borrow from a bank or federal trust company.
There are several alternative solutions for down payment assistance, including personal loans, lines of credit, borrowing from family members, and government programs.
To improve your chances of securing a mortgage, you should have a good credit rating, stable income, and employment history, and be prepared to pay the closing costs.
Another option if you’re tight for funds may be an interest only mortgage. By paying off less principle you may have more money available to cover the down payment cost.
While a no-down payment mortgage can be a great option for some buyers, it’s important to weigh the pros and cons carefully. Before rushing into homeownership, make sure you’re financially stable and prepared for the costs involved.