Most of the people in Canada cannot think of buying their own home because of the frightening down payment option that comes with the mortgage term. With the increasing home prices in major cities, even 5% down payment becomes a number which people cannot afford.

That’s why when customers came across the option of no down payment mortgage plan; they definitely like to consider it. But the truth behind this plan is different, the option may seem attractive to many home buyers but it is not a great idea for an average looking to buy a home. This article explains everything you need to know about no down payment mortgage plan so that you can make a better decision.

A no down payment mortgage plan looks like a feasible option if you are currently paying a huge amount of monthly payment in the form of rent while trying to save money to buy your first home.  But before you make this decision to choose a plan with no down payment you should make sure that this is the right option for you to consider.  There are some conditions that need to be met for this program.

  • You should have a stable monthly income.
  • Your credit score must be above average.
  • You should be able to afford monthly mortgage payments and other expenditures.
  • You should be prepared for any emergency financial situation.

If you think your current financial situation meet all these requirements then you can definitely benefit from a no down payment program. However, it is still up to your lender to approve your application. On the other hand, if your current financial situation is not like this, it would be better for you not to consider this plan and continue saving for a more suitable program.

If you are going to buy your home under a no down payment program, it doesn’t mean that you are going to pay any down payment. It simply means that you are not going to pay the down payment amount with your own money; you are going to borrow it which means you are getting into more debt. That’s why it is important to consider your financial situation before choosing such a plan.

Also, it should be kept in mind that government in Canada does not allow clients to borrow down payment from their lender if the lender is a bank or company. So if you are not planning to pay the down payment and consider borrowing instead, you need to find a new lender.

There are obviously some issues associated with borrowing down payment amount. If you are going to borrow it you are taking more debt, secondly, the interest rate on borrowing down payment amount is very high sometimes even higher than the actual mortgage.

Therefore if you are planning to buy a new home but saving the amount for down payment is taking you long, then now is the time to consider a no down payment mortgage plan. But you should keep in mind all the pros and cons of this plan before taking the final decision. Take your time and explore all your options before finalizing a plan.

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