While it is true that almost anytime you see a deal like that it is probably too good to be true. In the mortgage industry there was a time that there were several mortgage products available that allowed a buyer to finance a home to 100% of its value, effectively making a zero down or a no money down situation. As the economy had uncertainty in recent years, most of these products have disappeared as they were too risky for the banks to be interested in them. The banks hate to lose money, and when they finance a house to 100% they are at great risk of losing some money.
100% financing still available!
As the zero down mortgage products disappeared, the aggressive lenders were still looking for a product with a gimmick that would attract consumers the way that the no money down mortgages did. What they came up with was a 'Cash Back' program that would encourage you to buy a home with 5% down payment, then upon closing give you back a cash rebate of 5%, essentially making your purchase a zero down or no money down purchase again.
While this mortgage product sounds attractive, it does have a few negatives. First, the it is harder to qualify for. You must have great credit and low debts. (which sort of begs the question, why would someone with great credit and low debts not have 5% down? But thats another rant). Secondly, the interest rate on this mortgage product is higher than what an applicant with 5% down payment or more would pay. In fact, almost 2% more! So while the 100% financing mortgage product still exists in a creative form, we do not recommend this zero down or no money down product for everyone.
Get in touch, let us show you all the details, then make an educated choice if it is right for you.
Calgary Mortgage Broker