With the recent boom in prices in the Vancouver area, it is becoming increasingly more difficult for buyers to save up enough for a 5% downpayment. With the inflation in property prices, saving for a downpayment can seem like a moving target and a never ending struggle without a gift from family or large winfall
However, some lenders offer a flex down mortgage option which allows prospective buyers to secure a mortgage without saving up for a down payment. The money can be borrowed from sources such as a line of credit, credit card, personal loan or even equity on an existing home to buy an investment property.
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So, here are the nitty gritty details about the program and what you should know:
- Choice Of Lenders: There are fewer lenders who offer Flex Down Mortgages. Because flex down is not universally available, there will be less available lenders for the purchaser. This makes it even more important to work with a Mortgage Broker because we know which lenders do and do not offer the program and will seek the best lender for you.
- Credit Rating: Because you will be borrowing additional funds over your mortgage, credit-rating is important to show that you have a good history of paying debts on time. (Call me for a FREE Credit Assessment). The lender will look for a manageable debt-to-income ratio low by not going for the most expensive home in their price range but rather something more appropriate to their current income and debt.
- Closing Costs: Most lenders will look to see if you have the 1.5% of purchase price available for your closing costs. In some cases you can borrow this as well, however it does help to strengthen your application by having this money saved.
- Debt to Income Ratio: Since the purchaser is borrowing money for a down payment, this will be calculated and included and taken into account when considering your monthly payments. In the case of a line of credit the lender will take into account 3% of the outstanding balance. What this means is that if you take a line of credit of $15,000 for your downpayment, then $450 per month will be added to your other debts and included in your calculation.
While a Flex Down mortgage may not be for everyone it can be just what the doctor ordered to help first time buyers get into a home without having to save up that full downpayment.
If you want to get out of renting, put some of that money back in your pocket or think you qualify for a more expensive property but don't quite have the downpayment I can guide you through the process and teach you how to keep your money in your pocket. Give me a call at 604-619-3319, I'm always happy to help!