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From Renting to Owning: Zero Down Mortgages in Canada


The dream of owning a property in this thriving market might seem like an uphill battle.

Now, here’s the catch – as housing prices soar, so does the required down payment for a house. That’s where things get interesting. You see, the down payment is a pivotal part of any mortgage. A larger down payment can work wonders, reducing your mortgage term and interest rates significantly.

But what about first-time home buyers? For them, the down payment can be the deciding factor between realizing their dream of a perfect home and falling into a never-ending debt spiral.

So, here’s the exciting twist – there’s a solution, a lifeline for those struggling with down payment woes. It’s called a ‘zero-down mortgage.’ That’s right; you can turn the tables on this daunting challenge.

Now, let’s dive into the world of zero-down mortgages. What exactly are they, and how can they make your homeownership dreams a reality?

Imperative Factors of Zero-Down Mortgages

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Zero Down Mortgage does not mean you don’t have to pay a down payment on a mortgage.

● Zero Down Mortgage means borrowing the amount to pay as your down payment. 

How a Down Payment Works?

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Before discussing what a zero-down mortgage is and how it works, we must understand how a down payment works.

CMHC (Canada Mortgage and Housing Corporation) has laid down some principles to follow for a down payment.

● If the property you are trying to own is valued at less than $500,000 or less, you have to pay 5% as a down payment.

● If the property you are trying to own is valued at more than %500,000, you have to pay 10% as a down payment.

For example, the average property price in the Greater Toronto Area (GTA) is $688,137 (according to RE/MAX) so you have to pay 10% as a down payment ($68,813).

The average property price in Calgary is $263,480, so you have to pay 5% as a down payment ($13,174).

● Aside from the percentage of down payment you have to pay according to the value of your property, you also have to purchase mortgage default insurance if you pay less than 20% as a down payment.

● The overall cost of your mortgage will increase as this mortgage default insurance’s interest rate can be 4% – 5%.

If you want to avoid purchasing this mortgage default insurance, you have to borrow a 20% downpayment from a financial institution or a lender.

A Mortgage with Zero Down Payment?

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In Canada, there is no mortgage where you don’t have to pay a down payment.

However, there is a trick to paying this down payment without saving for a down payment.

Borrowing finances from a financial institution or lender can be an option if you have not saved for a down payment.

● You can skip the saving process but have to acknowledge that you are piling your mortgage and this down payment debt.

If you are borrowing money to pay for your down payment, you should consider your finances and opt for it if you have a strong financial foundation.

● People with bad credit might not be considered for borrowing this loan as they would not be trustworthy to the lender or financial institution.

Working of Zero Down Mortgage

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You have to pay a down payment if you want to home and must also be familiar with the closing costs you have to pay that are not included within the down payment:

● Legal fees

● Land transfer taxes

● Home inspection services and more.

A Zero Down Mortgage works when you borrow money to pay your down payment from a lender or a financial institution if you don’t have savings to pay for the down payment.

● If you opt for a zero down mortgage you are not required to have cash at closing.

Mortgage Down Payment Loan Options

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Some options that you can go through for paying your mortgage down payment:

● Credit card

● Line of credit

● Personal loans

● Financial savings of your family

Getting Approval for a Down Payment Loan

 If you want to get approved for a down payment loan, there are two imperative factors that you need to consider that help in approving your loan application.

● Employment status: Having a stable income source and financial stability is what the lender looks for before sanctioning your loan. If you are financially well enough to pay your mortgage and down payment loan simultaneously, your loan will be approved.

● Credit score: If you don’t have a worthless credit score, you can obtain a loan to pay your down payment.

Pros and Cons with a No Down Payment Mortgage Plan

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You’re closer to owning your dream home than renting.You need to manage two loans simultaneously.
Paying a down payment of less than 20% triggers mortgage insurance.Multiple loans add to your existing debt.
A down payment enables you to start building equity in your home from day one, increasing ownership in your property over time.Interest rate fluctuations can lead to financial challenges during mortgage renewal.


However, it is imperative to approach a no-down payment mortgage plan with a discerning eye. While it does grant immediate access to homeownership, this expedited route also poses certain risks that necessitate careful consideration.

If you are eager to own your dream home but have not saved for a down payment, a zero-down mortgage plan might help you purchase your dream home. However, one must also consider the risks of purchasing one.

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