By eliminating the down-payment barrier and offering a no-down-payment mortgage to qualifying clients, RBC Royal Bank is making it much easier for would-be homeowners to get into the current hot housing market.
RBC's newest home-buying solution, the RBC No Down Payment Mortgage, allows home buyers with steady cash flow and good credit to obtain financing even though they have not yet saved even the minimum 5 percent down payment. They just to have enough funds for closing costs, which are 1.5 percent of the purchase price.
"This is a great time to get into the housing market, but many people who can handle the payments just don't have the necessary 5 percent saved for a down payment," said Scott Brown, vice president, residential mortgages and home equity financing products for RBC Royal Bank. "This new option will allow them to get in on the housing market sooner, rather than waiting on the sidelines while housing prices, and possibly interest rates, begin to escalate."
Typically, people without the required down payment had limited options that usually resulted in higher overall home ownership costs. They could postpone their home purchase altogether, borrow for the down payment, or obtain mortgage financing from a sub-prime lender at a higher cost.
RBC's No Down Payment Mortgage provides a new option to would-be homeowners to lock in affordable mortgage payments, thereby minimizing the risk of rising house prices and interest rates. It is available on five-year terms to qualified purchasers.
(You can learn more about the RBC No Down Payment Mortgage by calling 1-800-ROYAL(R)1-1 or by visiting www.rbcroyalbank.com/products/mortgages/.)
General Motors Acceptance Canada (G-MAC) has perhaps the best no-down-payment deal – it will lend up to 117 percent of a mortgage to buyers with excellent credit. Other lenders will also offer very attractive down payment terms to anyone willing to pay a few points over the prime rate.
Meanwhile, Canada's largest banks have dropped their mortgage rates as inflationary pressures ease amid speculation that the Bank of Canada may cut interest rates sometime this spring. This has pushed bond yields lower.
TD Canada Trust, for instance, trimmed at least a tenth of a percentage point off all its longer-term fixed mortgages. Its 5-year "Best Rate" mortgage is now 5.25 percent. Bank of Montreal chopped a fifth of a percentage point off its 1-year closed mortgage. It now goes for 4.55 percent. BMO's 5-year closed mortgage is down a tenth of a point to 6.35 percent. CIBC is trimming its mortgage rates for the second time in a week. Its 6-month convertible mortgage drops a quarter of a percentage point to 5.45 percent. Its 5-year closed mortgage drops a tenth of a percentage point to 6.35 percent. Its 10-year rate falls 0.15 percentage points to 7.9 percent. And National Bank trimmed its 5-year closed rate by 0.05 percentage points to 6.45 percent.
Needless to say, if you need to borrow money to buy a home in Canada, this is time to do it.
Frank O'Brien can be reached at fobrien@dccnet.com.
How much can you afford? Simple. Just refer to the chart below!
| Income, home price and down payment guide | ||||
|---|---|---|---|---|
| Household income | 10% down payment | Maximum home price | 25% down payment | Maximum home price |
| $25,000 | $5,400 | $53,800 | $16,500 | $66,200 |
| $30,000 | $7,000 | $70,000 | $21,500 | $86,000 |
| $35,000 | $8,600 | $86,100 | $26,500 | $105,900 |
| $40,000 | $10,200 | $102,300 | $31,400 | $125,800 |
| $45,000 | $11,800 | $118,400 | $36,400 | $145,700 |
| $50,000 | $13,500 | $134,600 | $41,400 | $165,500 |
| $60,000 | $16,700 | $166,900 | $51,300 | $205,300 |
| $70,000 | $20,000 | $199,200 | $61,300 | $245,000 |
| $80,000 | $23,200 | $231,500 | $71,200 | $284,800 |
| $90,000 | $26,400 | $263,800 | $81,100 | $324,500 |
| $100,000 | $29,600 | $296,200 | $91,100 | $364,300 |
| Figures are rounded to the nearest $100. | ||||
The above table gives you an idea of the maximum home price you can afford. These estimates take into account household income and the percentage down payment you have. They assume a mortgage interest rate of 8%, average tax and heating costs in Canada, and the mortgage an average Canadian would qualify for based on a 32% debt service ratio. Please note that for loans greater than 90% of the value of the home, a maximum house price of up to $250,000 may apply, based upon the price levels in your community. Contact your Ontario Equity Broker for the maximum price in your area
Caveat: No Money Down Mortgage
A true 100% mortgage financing product that is available in Canada. This type of mortgage generally has a higher interest rate.
I can assist you with all of the complexities when you purchase or sell your next home. Please don't hesitate to email me
