If you have not saved the minimum 5% down payment, but your credit history is well established and all other factors (net worth, employment, etc.) are stable, you may qualify to borrow your down payment from either an existing credit line (loan, line of credit, credit card etc.), or be eligible for a 5% Cash Back Mortgage.

Borrowed Down Payment: If you are planning to borrow funds from an existing credit line, you must verify that you have the funds available to you (limit of credit line) and confirm the monthly payment you will have to make when you have drawn down these funds.  This monthly payment must be included in your application and form part of your Total Debt Service Ratio.  A minimum credit score of 650 and two years reporting on your credit bureau is required by most lenders to allow a borrowed down payment.

5% Cash Back Mortgage: In this type of financing, the lender will pay you 5% in cash back at the time of closing, which then becomes your down payment.  This mortgage is usually at bank posted rate (slightly higher than the best broker discounted rate) and is for a term of no less than 5 years.  If you terminate the mortgage loan before the 5 year term has matured, you will be subject to a pro-rata “grab back” of the percentage of cash back advanced.  For an example, on a $100,000 purchase you would receive 5% or $5,000 in cash back to be applied as your down payment, and if you only carry the mortgage for 3 years, upon discharge of the mortgage you would owe the lender $2,000 (for 2 years remaining) plus the mortgage penalties.

Although the rate you are paying in interest for this mortgage is higher than the ”best rate”, it is a convenient form of financing and the rate of interest charged on the advanced cash back is competitive to a normal bank loan.  You require a well established credit history and a minimum credit score of 650 in order to qualify for a Cash Bank mortgage.