Every buyer of a principal residence, no matter if you’re a first time buyer or have bought ten times prior, is eligible for the 5% down program. When buyers between 5% and up to 20% down, the mortgage must be insured by one of Canada’s 3 mortgage insurers (CMHC, Genworth & Canada Guaranty).
-The maximum purchase price is $999,999. Therefore if you a purchase a home for $1m or more, you must have a minimum 20% or more down payment.
-Must be a qualifying home (no raw land).
-Must qualify based on income. No self-employed, stated income applicants with only 5% down. 10% down allows the opportunity to use a stated income program.
-Must have a minimum 600 credit score. Some lenders do require slightly higher. GDS* 35% and TDS* 39%
-For a credit score above 680, GDS 39% and TDS 42%
-The maximum amortization is 25 years. If borrowers have more than 20% down, amortizations are available up to 30 with a couple exceptions to 35 years. Depending on individual lenders policies.
Borrowers are allowed any term they wish. However, if borrowers take a term shorter than 5 years, or a variable rate mortgage, they have to qualify at the posted 5 year fixed interest rate which is usually higher. If borrowers take a term of 5 years or longer, they can qualify on the ‘contract’ interest rate, which is typically lower.
A minimum provable 5% down payment (plus 1.5% for closing costs even though it may not be this much), must be in the buyer’s possession a minimum of 15 days prior to the closing date of the purchase.
High ratio mortgage insurance premiums:
- 95% Loan to Value = a Premium of 3.15%
- 90% Loan to Value = a Premium of 2.40%
- 85% Loan to Value = a Premium of 1.80%
- 80% Loan to Value = a Premium of 1.25%
- 75% Loan to Value = a Premium of 0.75%
Mortgage insurance premiums are calculated on the size of the mortgage and added to the balance. Generally once a buyer has 20% or more down, it is not necessary for them to pay the insurance premium.
GDS = Gross Debt Servicing ration. The percentage based on your monthly income to the monthly mortgage payments, property tax, heat and 1/2 strata fees if applicable
TDS = Total Debt Servicing ratio. Same as above however, now your monthly liabilities are included in the calculation. ie. car payments, student loan payments, credit cards etc. that show up on the credit bureau.