Homeownership is something that many people cherish. It comes with several benefits:
- no longer paying rent, which adds no value to your equity position,
- stability from living in your house,
- good long-term investment,
- and many more.
But the high price tag of homeownership is a hurdle for many Canadians, especially those getting into the market for the first time. The average house in Canada reached $688,000 in June 2021
At this price, the required minimum down payment for a good credit mortgage loan or a prime mortgage loan is $43,000. With the high living expenses, it is not easy to save this $43,000.
To help you buy your first home more effortlessly, we have shared a few available options you can use to supplement or as your down payment for your mortgage loan.
We imply that the required down payment is not coming from your resources with zero down payment. Someone or a third-party institution can offer it to you to help you buy your first home.
Buying a House with Zero Down Payment in Canada
Your local county First-time Homebuyer Assistant Program
The best option to buy a house in Canada with zero down payment is the First Time Homebuyer Assistant Program offered by local counties and municipalities.
Generally, the down payment assistance program will provide you with a 5% down payment.
Here are the essential qualification criteria for these down payment programs:
- You are a first-time home buyer; you have not owned a house in the last four years or have any interest in a home.
- The new home must be in the county offering the down payment assistance program.
- You are 18 years of age and above.
- You plan to use the home as your principal residence, which means you can’t transfer or lease it.
- You have been pre-approved for a mortgage.
Borrowed Down Payment Mortgage
An intelligent way to buy a house if you cannot come up with the required 5% down payment is to use the borrowed down payment mortgage program most traditional lenders offer.
The required monthly payment for the borrower will be included in your liabilities as part of your monthly debt obligations.
This mortgage program allows you to use personal loans, credit cards, lines of credit, etc., for your down payment.
The required monthly payment of the borrowed portion of your down payment will be included in your liabilities.
Therefore, your income must be sufficient enough to cover the monthly costs of the borrowed down payment.
Gifted Down Payment Mortgage
You can also buy a house with a gifted down payment from an immediate family member.
An Immediate Family is your parents, siblings and children.
Your spouse is not considered your immediate family member by most lenders. With or without your spouse on the title, they still have a few rights to the property.
Lenders prefer the spouse to be on the property’s title to prove the mortgage.
The gifted down payment mortgage program allows you to buy a house without necessarily saving for the down payment.
The money gifted must be non-refundable.
Use RRSP Loan
If you are a first-time homebuyer, you can use the Registered Retirement Savings Plan (RRSP) to buy your dream home without the stress of pulling money from several sources to fund your down payment.
You can borrow up to $35,000 from your RRSP for the down payment. For couples, you can borrow up to $70,00 from your RRSP.
The first-time homebuyer RRSP program allows you to borrow money from your RRSP investments without paying taxes for your house purchase. You have up to 15 years to repay this money into your RRSP account.
Learn More: First-Time Home Buyer Plan 101: A Comprehensive Overview
Increasing housing costs can make it challenging to save for the compulsory down payments on your dream house.
But government incentives, programs, and lender products can help you cover the cost of this down payment.
While this means paying zero down payments or lesser than you ought to pay, it is not always the best option.
Thus, it would help if you spoke with a mortgage planner or financial expert before deciding how to pay your down payments.