Are you getting
ready to buy a home and obtain mortgage financing? Knowing your options before
jumping in is important. This is part 3 of a 4 part series that gives you
important Ontario mortgage news and information about the various types of
mortgages available in Ontario. Getting a mortgage does not have to be
stressful, and knowing what mortgage types are available to you can help keep
the search for your perfect home stress-free.
This third Ontario mortgage news blog will
focus on the zero down mortgage. So what is a
zero down mortgage? As its name suggests, it is a mortgage that requires you to
put no money down as a down payment on a house. In Ontario, according to
Canadian Mortgage and Housing Corporation guidelines, a minimum 5% down payment
is required for every house purchase in the province. But sometimes saving is
easier said than done, and so a zero down mortgage can be the ideal option if
you are ready to buy a house but are lacking the funds for that necessary 5%
down payment.
How does a zero down mortgage work? A zero down mortgage is a mortgage that combines
traditional mortgage financing with your down payment. This means that the
interest is usually a bit higher (usually 1-2% above prime) to allow the bank
to recoup its financing of your down payment. Furthermore, it is set for a
period of no less than 5 years so that the bank can get back those down payment
funds.
Are you asking yourself will I get approved
for a zero down mortgage? Well, here are some things to keep in mind.
Qualifying for a zero down mortgage means having a great credit score and
pristine credit history. Since the bank is fronting the entire mortgage rather
than just a portion of it, they want to make sure that they are protected – so
if your credit is not great it is unlikely that you will get approved for a
zero down mortgage.
What about flexibility? Well, a zero down mortgage offers less flexibility than say a
variable rate mortgage or a fixed rate mortgage. Because you are relying on the
bank to back you, they give far fewer options, such as setting the length of
the mortgage or setting a variable versus a fixed rate. However, as far as
giving you the chance to buy without a down payment, it is an important option.
If you are ready to buy a house but are
without the required minimum 5% down payment, but do have good credit history,
a zero down mortgage may be an option for you.
Instead of stressing over where to find that down payment or having to wait
until you have saved it all, speak to a mortgage broker about the benefits of
qualifying for a zero down mortgage right now.
For more Ontario mortgage news or for more
information about a zero down mortgage, please contact Paul Mangion of The
Mortgage Centre at 416-204-0156 or visit www.themortgagecentretoronto.com.
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