No Down Payment Mortgages in Calgary

Spire Mortgage is proud to be one of the few providers of no down payment mortgages in Calgary. While they are less common, no down payment mortgages are possible in Canada, and our team is here to guide you through the process!

Can You Get a Mortage With No Downpayment?

Buying real estate in Canada typically requires a down payment, which can be challenging for many people. However, it's possible to purchase a property without saving up for a down payment by borrowing the down payment. 

This is what’s known as a no down payment or zero down mortgage. A mortgage without a downpayment or a “no down” mortgage is a bit of a misnomer. There is no such thing as a mortgage with no down payment at all.

With a no down mortgage, you’re still technically making the down payment, you just don’t need to have the down payment in your savings. Instead, you’re taking out a loan to cover the down payment.

How Do No Down Payment Mortgages Work?

Typically, when you buy a house, you need at least:

  • 5% down for homes less than $500,000

  • 10% down for homes over $500,000

  • 20% down to avoid paying mortgage insurance

For example, for a house worth $400,000 you would need at least $20,000 saved up for most mortgages. 

For a zero down mortgage, you would borrow the down payment. So instead of having the $20,000 in your savings, you would borrow that amount. 

How Can You Borrow a Down Payment?

RRSP Loan

At Spire Mortgage, we recommend most clients use an RRSP loan for a no down payment mortgage. An RRSP loan allows you to borrow money to put into your RRSP. 

The RRSP loan should be $35,000 (the maximum amount you can withdraw from an RRSP for a down payment) or your RRSP contribution limit, whichever is lower.

Putting the money into an RRSP account saves you money on taxes. You can use the tax savings or tax refund to either:

  • Increase your down payment

  • Pay off your RRSP loan

A mortgage broker can help you determine the best strategy here, so contact us to learn more. Then, leave the loan in your RRSP for 90 days, and withdraw the money to use as a down payment.

Personal Loans

Personal loans are another way to borrow a down payment and get a no down mortgage. With a personal loan, you’ll have more flexibility with rates and repayment terms compared to credit cards or lines of credit.

Credit Card

Depending on your credit limit, you could put your down payment on a credit card. However, this not the best way to borrow a down payment. 

You’ll have to pay everything back in 30 days, or you’ll end up paying 20% interest or more. This is a much higher interest rate than what other borrowing methods have.

Line of Credit

A line of credit will have a more favourable rate than a credit card. Just note that your line of credit and mortgage can’t be from the same bank or financial institution.

Parents

Estimates show that around 30% of people get help from their families. While not everyone can go to the bank of mom and dad, it is a borrow-free (and interest-free) way to get your down payment.

How Do You Get Approved for a Borrowed Down Payment?

If you're planning to borrow some cash for a down payment, it's essential to understand what the lender will be looking at when they review your application. Here are two crucial things to keep in mind:

  1. Employment Status: Your job needs to be stable with a monthly income that can handle loan payments, mortgage payments, and any other monthly payments. 

  2. Credit Score: Your credit score also plays a part in getting approved for the loan. Having a history paying your credit card bill on time and in full will show that you can repay your loan.

What Credit Score Do You Need to Buy a House with No Down Payment?

In Canada, credit scores can range between 300 to 900. Most lenders want to see a score of 700 or higher before they approve a no down payment loan. 

A credit score of 600 or more doesn’t guarantee you will be approved for the loan, but it’s a rough estimate. Lenders will also look at things like your income and your debt-to-income ratio to make a decision.

Is It a Good Idea to Get a Mortgage with No Down Payment?

Pros

  • You don’t have to save for a down payment

  • You can own a home and build equity

  • You avoid paying CMHC default insurance if you borrow enough for a 20% down payment

Cons

  • You have to pay 2 loans at once: your mortgage loan and your down payment loan

  • You have a higher risk of not being able to pay your mortgage if interest rates increase

  • You won’t have any equity in your home initially

You should only consider this option if you’re confident you can repay the loan. Remember, with a no downpayment mortgage you’ll be repaying 2 loans: your mortgage and the loan for your down payment. 

That means you’ll be making 2 loan payments every month in addition to expenses like utilities, car payments, groceries, and more. Here are some pros and cons to help you decide if a no downpayment mortgage is right for you.

Is a No Down Payment Mortgage Right for You?

The cost of your house isn’t the only cost to consider when buying your house. To finalize your home purchase, you’ll need to pay for things like a home inspection, land transfer taxes, and legal fees. 

These are usually a few thousand dollars, so you’ll need some savings to buy a house. You also need to consider if you have enough room in your monthly budget to repay a loan, a mortgage, and all of life’s other expenses.

There is a lot to consider, but thankfully, you don’t have to make mortgage decisions on your own. The mortgage experts at Spire Mortgage are happy to help you evaluate your options, including a zero down mortgage.