If you are thinking about purchasing your first house, chances are you have been saving a long time for this moment. However, what happens if you have an emergency and end up spending a significant part of your money? Would you have to wait a couple of years to save enough for the down payment? The answer is no, you still have the option of buying a house with no down payment.

Even when you are committed to buying your first home, there are things in life no one can predict, such as a global pandemic. Luckily, you don’t have to give up your dream right now, a no money down mortgage in Ontario could help you out. Make sure that before you choose this option, there is no way you can collect the downpayment on time. If you don’t know how much is the down payment for the property you want, below we will explain everything you need to know. 

How much is a down payment in Ontario?

All the down payments, for any kind of property, are calculated from the purchasing prices. In this regard, there are three down payment percentages, you would need to pay depending on the price of the house. Here is a basic breakdown of down payment requirements in Canada.

  1. Properties equal to or below 500,000 = 5% of the purchasing price
  2. Properties between 500,000 – 999,999 = 10% of the purchasing price
  3. Properties equal to or above $1 million = 20% of the purchasing price

For many young people, even saving 5% is an impossible scenario, and also why they prefer renting. However, with a no down payment mortgage, Ontario offers them another way to own their first property. That’s why in this article, we will explain to you what is a no down payment mortgage and how you can get one.

Can I get a no down payment mortgage in Ontario?

This is the first question that the majority of people ask when they find out it is possible to buy a house with no down payment. The answer is yes, you can have a no down payment mortgage in Ontario. The tricky part to understand about this option is that you actually have to make a down payment. 

All of this might sound very confusing right now but, hang on, we are going to break it down. According to the law, everyone who is going to buy a Canadian property must make a down payment. But, when we are talking about buying a house with no down payment, it means you won’t have to spend your money. Instead, you will be borrowing it.

As you might have guessed by now, when you get a no money mortgage in Ontario, you will be acquiring more debt. You can do this through a line of credit, a loan, charge it to your credit card or even asking a family member to lend you the money. The most popular option to get the necessary money for a down payment is a Flex Down. 

Should I get a no money mortgage in Ontario?

This is an important question you should ask before choosing this route because it will impact your financial life. Any of the no down payment mortgages in Ontario will only increase your debts. However, it is not all bad. Zero down payment mortgages are a good option if you have a stable job and enough money to pay your bills.

Because this is a big decision that will influence a great part of your finances for the next couple of years, it is important to look at the pros and cons. That’s why before we prepared a list to help you decide the best option for you.

Pros

Stop renting

Even when you will acquire a big amount of debt with a zero down payment mortgage, it is way better than expending your money on rent. When you are renting, every time you pay, nothing goes towards owning your home. But, if you purchase a home, that changes because you will start building equity.

Increase your net worth

The earlier you start owning assets, the faster you will have equity. Once you acquire a mortgage or a loan for a car, all of those assets help you grow your net worth. This means that every time you pay for those loans, your wealth is slowly increasing. 

Default Mortgage Insurance

The default mortgage insurance is something unavoidable that you will have to purchase when buying a property. However, if you borrow the whole amount for the down payment, you can skip this step and save money.

Cons

Home equity

This is the first downfall of having zero down payment mortgage, you won’t have home equity. The advantage of paying a downpayment is that even when it only represents a small percentage of the property, you still get to own that portion of the property’s purchase price. 

Additional Interest

Because you will borrow a significant amount of money to make your down payment, the interest rates will be higher. Chances are that even if you borrow just 5%, the interest can be greater compared to your mortgage.

Debt

Finally, as we mentioned before, you will have more debt in your hands. This is not so bad as this loan is the only one you have. But, if you have more debts to cover, you can end up spending your whole monthly salary on bills.

How to buy a house with no down payment in Ontario?

If you still want to get a no down payment mortgage, we will explain all the conditions you need to meet. First, you need to understand that when you borrow the down payment, the lender should have no relation to the property. In other words, the bank that gives you the mortgage cannot lend you the money for the down payment. 

Now, let’s look at the two main requirements for a no money down payment mortgage.

  1. You should have a credit score of at least 650, but the ideal should be ~680. Also, you need to have a good credit history.
  2. A stable job is required to ensure the lender you will have enough money to pay every month. In case you don’t have a stable income, this is not a good option.

With all the information in this article, you know everything there is about how to buy a house with no down payment in Ontario. The only thing left to do is start house hunting to find your dream house. 

If you’re looking in the Greater Toronto Area, check out our developments here! We have many homes to choose from in the city’s most desirable areas, including Brampton, Kleinburg, and Whitby.