Frequently Asked Questions
How much do I need for a down payment to buy a house?
The minimum down payment required is 5% for an owner occupied home (5% for the first $500,000 and 10% for the rest up to 1.5 million purchase price). You will also need to set aside approx 1.5% of the purchase price for closing costs.
How much do I need for a down payment to buy a rental property?
The minimum down payment required is 20% to purchase a rental property. However, if you decide to purchase a duplex (2 units) and you will live in one of the units, you can purchase with as little as 5% down payment (5% of the first $500,000 and 10% for the rest up to 1.5 million purchase price). If you decide to purchase a triplex or fourplex and live in one of the units, you will need a minimum of 10% down payment.
Can I borrow my down payment?
Yes! If you are a first time home buyer, you can take advantage of the flex-down program. You can use funds from borrowed sources such as a line of credit or a gift from a friend. Please note the loan will be included in the debt servicing ratios. Your income will need to support the mortgage plus this debt used for a down payment.
What is the minimum credit score required to get approved?
With less than 20% down payment, most lenders will require a 650 credit score (620 in some cases). With 20% of more down payment, there is no minimum credit score.
Can I get approved even with a bankruptcy or consumer proposal on my credit report?
Yes! Some banks will approved you as long as you have been discharged from either a bankruptcy or consumer proposal 2 years ago and have re-established credit for 2+ years. This means you have applied for new credit (At least 2 revolving credit products such as lines of credit or credit cards), and you have not missed payments for 2+ years.
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If you want to get approved right away without waiting for 2 years of discharge, you can apply with an alternative lender if you have 20% or more down payment on a purchase or 20%+ equity on a refinance. You can even use the alternative lender to pay off your consumer proposal.
How fast can I get pre-approved or approved?
Pre-approvals can be completed within a few hours. Approvals (live deals) can take 1 to 7 days depending on the lender and the time of the year.
What income documents will I have to provide for my application?
If you are employed, you will need to provide employment letter, paystub and in some cases T4s or notice of assessments.
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If you are self-employed, and you want the best interest rates, you will need to provide your most recent T1 Generals (taxes) and notice of assessments. (If purchasing an owner-occupied home, in some cases you can get approved with stated income using your notice of assessment and the stated income).
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If you are self-employed with low declared income, you can get approved with business bank statements and invoices instead of using income taxes.
How is my interest rate calculated?
Each lender has their own way to calculate interest rates. Typically, the rate will be determined based on credit score, insured or conventional mortgage, mortgage amount, loan to value, and property type (owner-occupied or rental property).
What are my benefits as a first-time homebuyer?
As a first time home-buyer, you will be able to get approved using a 30-year amortization, even with a smaller down payment. You will also be able to use your RRSPs for your down payment using the Home Buyer's Plan (up to $60,000 per bottower). In Ontario, you will receive a land transfer tax rebate and you will also receive an income tax credit.
What is a second mortgage?
A second mortgage is another mortgage you can register behind your current mortgage. It allows you to draw equity from your home and use it for any purpose such as renovations or paying off debt.
Second mortgages will typically have a higher interest rate (10+%) and added closing fees. If you need to payoff high interest debt, the second mortgage may help you do this and allow you to keep your first mortgage if you don't want to break it. The second mortgage does not show up on the credit bureau, therefore it will increase your credit score if you use it to payoff debt.