Project requiring no down payment no slam dunk

by Justin da Rosa27 Jan 2016
Not so fast: the “no down payment” condo project being reported has not yet been given the go-ahead by CMHC, according to the Crown Corporation.

The Globe and Mail recently ran an article about Strand condominium project by Townline in Port Moody, which is reportedly working with CMHC to offer units to buyers who aren’t required to put down a down payment.

The program has not yet been given the go-ahead by the Crown Corporation.

“The proposal is still under review,” Jonathan Rotondo, senior media relations officer with CMHC, told REP sister publication, MortgageBrokerNews.ca.

CMHC typically requires a 5% down payment for buyers to qualify for mortgage insurance. However, according to the report, the developer, Townline Homes, is working with CMHC and BC housing to allow buyers to purchase a unit with no money down.

However, that may not be entirely accurate.

“Essentially, the developer is selling the property at approximately 8% below market value to homebuyers that are able to income qualify for the mortgage. The 8% is considered down payment / equity by CMHC as part of their affordable housing initiatives,” Jason Henneberry, a broker with Verico MortgagePal Inc. in B.C., told MortgageBrokerNews.ca.  “This approach differs from the flexible down payment program where qualified homebuyers are eligible to borrow their down payment via line of credit or personal loan.”

And that was confirmed by CMHC.

"CMHC offers Flexibilities for Affordable Housing (Homeowner Mortgage Loan Insurance). Under this program, CMHC will accept a broader range of down payment sources -- that means alternatives to cash from borrowers (borrowers being homebuyers),” Rotondo wrote in a followup email to MortgageBrokerNews.ca. “This could include sweat equity, grants, borrowed down payments or rent-to-own payments. This is not the same thing as requiring no down payment.”

MortgageBrokerNews.ca will follow the story to see if – and when – the proposed program gets the go-ahead from the Crown Corporation.

COMMENTS

  • by 1/27/2016 11:42:25 AM

    This is a scary proposition! No matter how they disguise the down payment (with a price reduction to the purchase price). Does that mean that any negotiated price reduction off a list price can be applied as a Downpayment? Don't follow a disasterous example! What about (equally ridiculous) NINJA mortgages? GREAT idea! (Not)
    Any Zero money down program is begging for failure! Buyers must have some "skin" in the property to encourage personal responsibility. It is irresponsible of CMHC to consider such programs. We (Canadians) must maintain the fiscal responsibility of the Canadian mortgage/real estate industry and avoid the silly programs that crashed the entire U.S. Market in our very recent past.

  • by MRH 2/3/2016 9:18:20 AM

    100% agree. Nobody should be allowed to buy real estate with no money down while having a mortgage backed by a crown corporation i.e taxpayers on the hook. I don't care what the situation is. You save up for your down payment - that is life. If you can't, then you keep renting. Ownership is not a right. The fact you only need 5% down is a gift - which I was able to take advantage of 20 years ago. And what does 8% below market value even mean?? That is a total joke. Does the developer overprice the units at $325,000 and then sell them for $300,000 claiming that is 8% below market value? What kind of bogus scheme is this?

  • by Bob K 2/9/2016 7:35:34 AM

    This proposal appears to have the ingreidients for financial flatlining, by some buyers, down the road. Instead, because saving the downpayment, has become increasingly difficult, particularly for first timers, why couldnt the government offer an incentive program based on a buyers good credit score, with 5 per cent down, forgiving 2 percent, upon completion. Thus we are rewarding the right "stuff", being good credit, and steering away from a society stuck in tenant mode, for what seems an eternity.

Poll

Is a Toronto foreign sales tax a good idea?