Can You Buy A House Without A Down Payment?
When it comes to purchasing your first house, the first thing that comes to your mind is saving money for the down payment. You may have been planning for this day for quite a long time, but what if you have to spend significant savings on some emergency? Is there an option to buy a house with no down payment or do you have to wait for a couple of years to save enough for the down payment?
Don’t worry, the answer is “No”. You don’t have to give up on your dreams of buying a property in Canada. So, let’s see what can be done in such a scenario and before that, let’s see how much down payment is needed to purchase a property in Canada.
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What’s the down payment amount?
The down payment FOR FIRST TIME HOME BUYERS amount is calculated from the purchasing prices for any kind of property. The three down payment percentages depend on the price of the house and here is a breakdown stated here for Canadian properties:
- Down payment for properties that are below or equal to $500,000 is 5% of the purchasing price
- Down payment for properties worth $500,000 – $999,999 is 10% of the purchasing price
- Down payment for properties worth $1 million or above is 20% of the purchasing price
SO if you want to buy a property for 700,000$ here is how the math works:
5% * 500,000 = 25000
10% * (700,000-500,000) = 20000
Total Downpayment =450000
For many people saving even 5% is quite a task. It is almost next to impossible and hence they prefer to stay on rent. However, to buy a house with no down payment or no down payment mortgage there is another way to purchase a property. Let’s check how.
Getting a no down payment mortgage:
A lot of people want to buy a house without a down payment because they do not have enough money, but the tricky part here is that you need to make a down payment. It may sound confusing but as per the law who wants to invest in a Canadian property should make a down payment.
When we are talking about buying a house without a down payment it means that you do not have to spend your money, but you can borrow it. When you get a no-money mortgage in Ontario it means you can acquire more debt. This can be achieved by a line of credit, the charge on your credit card, a loan, or a friend or family member can help you with this money. One of the most popular options for a down payment is a Flex Down.
Ask yourself first, that should you get a no money mortgage?
It is an important question before choosing this path because it will impact your finances. You can certainly buy a house without a down payment but it will increase your debts. If you have a stable job and enough money to pay your bills then the zero down payment option is helpful. It is not a bad choice then.
However, it is a big decision and a great part of your finances will be affected for a few years, you must evaluate the pros and cons. Check the table below to weigh the pros and cons.
| PROS | CONS |
| Save your rent money: When you pay rent nothing goes towards your home, but if you purchase a home, you start building equity and the money you used to pay for rent can now be used for your own house. So, it’s not a waste. | Home equity: You will not have home equity. When you pay a down payment and if it is just a small percentage of the property, you can still own the portion of the property purchase price. |
| Your net worth increases: As soon as you start owning assets, the faster you will have equity, and a mortgage or loan for a car or house help to grow your net worth. So, when you pay for these assets your net worth is growing. | Extra Interest: As you borrow a significant amount of money for making a down payment the rate of interest will be higher. So, if you borrow just 5 percent the interest can be high as compared to the mortgage. |
| Default mortgage insurance: This is something you have to pay for when you buy a property. If you borrow the whole amount for the down payment you can skip this step and save money. | Debts: As mentioned above there will be more debt accumulated for you. If you have more debts then your whole salary can go in paying the bills, but if this is the only debt then it is not going to be so bad. |
How can you buy a house in Ontario without any down payment?
If you still want to buy a house without a down payment mortgage then there are a few conditions you must meet. The first thing is that you need to understand on borrowing the down payment the lender should have no relation to the property. So, the bank that gives you the mortgage cannot lend you the down payment.
For a no money down payment mortgage to buy a house the important requirements are:
- You must have a credit score of 650 and the ideal should be 680. Your credit history should be good.
- You must have a stable job so the lender can be assured you will be able to make the payment every month else this is not a good option for you.
So, with this, you know how you can buy a house with no down payment in Ontario. So, start your search now and you can look for properties in Ontario or Greater Toronto on https://savemax.com/ and choose the most desirable areas in Canada where you want to own a property.
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