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Understanding The 100% Financing/Zero Down Program
The following information comes directly from CMHC.
"Finding the downpayment just got a whole lot easier. Borrowers can now utilize a number of additional sources of equity to purchase their home. Note:The Flex Down product only applies where the borrower is using non-traditional sources of equity for the minimum 5% downpayment.
Permitted Sources Of Equity
Lender cash back incentives;
Equity borrowed from any source that is arm's length or not tied to the property purchase or sale transaction. This includes personal loans, lines of credit or credit cards;
Gifts or grants from any party that is arm's length to the property purchase transaction; and
100% sweat equity from either the borrower or contributed by another party that is arm's length to the property purchase transaction.
Notes
Payments on borrowed funds are included in the TDS calculation.
Downpayments may not be paid out of or included in the insured
mortgage.This includes recovery of any lender cash back incentives.
Sources That Are Not Permitted Include
Sources that are not arm's length or tied to the purchase or sale of the property, either directly or indirectly, are not permitted. These prohibited sources include:
Builder incentives or loans;
Realtor or mortgage broker incentives or loans to the borrower that impact the property or selling price;
Loans or gifts from the property vendor;
Rent to own payments that are not in excess of the current market rent; and
Third parties that receive payment from the vendor or builder.
Premiums
3.40% plus the Progress Advance surcharge as applicable.
Eligible Borrowers
Minimum 680 Beacon Score (or equivalent) is required. Scores will be averaged where there is both a borrower and co-borrower.
Properties
Properties secured by a chattel mortgage or personal property security registration, as well as properties On-Reserve without a Ministerial Loan Guarantee, are not permitted.
Security
First priority position. Recovery of any lender cash back incentive must be done through the interest rate and not through a cash back repayment provision. Penalties cannot be capitalized.
Option Of Borrowing Closing Costs
Consistent with other CMHC Mortgage Loan Insurance products,
the Flex Down product (100% Financing)
allows the option of borrowing up to 1.5% of the purchase
price to cover closing costs. If the closing costs are borrowed,
any associated payment needs to be included in the TDS calculation
based on a 12 month repayment period.
Choice Regarding Type Of Interest And Loan Terms
Approved lenders can charge fixed or capped variable interest for loans insured under the Flex Down product. The product can be used for mortgages with a term as little as six months. These options allow you to provide borrowers with great choice and flexibility.