These days, mortgage brokers or managers at parties must feel like Avril Lavigne in a mosh pit full of sugar-cranked 14-year olds. Everyone wants to talk to them. Rates have never been lower (and won’t go any further into the basement, according to experts), and CMHC is now allowing you to borrow the downpayment on its popular 5% down program, rather than having to have cash or prove that your dear old Uncle Angus gave it to you as a gift. And the airwaves are filled with ads from banks and mortgage companies, from the oddly accented ING Guy (recently parodied by the Air Farce), to the Scotiabank commercial showing a couple screaming “long” and “short” at each other.

Making Downpayments Easier 

Up to now, prospective homeowners had to pony up the minimum 5% downpayment from their own resources… saving and scrimping, cashing in RRSPs, or busking on the street.

On  March 1, CMHC dropped that requirement, allowing the five-per-cent down payment to come from any source, including credit card, personal bank loans, other lender incentives, or borrowing from relatives.

It’s not free money, warn mortgage professionals – you still have to qualify and prove you can meet the payments. But it makes owning a home a step easier, particular for students, younger buyers and self-employed professionals who previously had to stockpile their cash before thinking of talking to an agent.

“CHMC has recognized there's a specific segment of the population, in particular first-time buyers, who shouldn't have to wait to save a minimum five per cent cash in order to qualify for lending,” says Andrew Moor, president and CEO of Invis. “It can take several years to save for a downpayment – and Canadians with healthy incomes who understand what they can afford now have a number of new options available to them.”   

The Long and Short of  It

Remember seeing it? Over and over – the couple in the Scotiabank commercial screaming “long!” “short!” at each other, and aside from wondering whether they are the two most annoying humans on the screen since the Canadian Tire couple, you may be asking yourselelf what it all means.

The Toronto Star’s Ellen Roseman explained it this way:

“Say you need a $100,000 loan. You can put $50,000 into a six-month term at 3.25 per cent and $50,000 into a five-year term at 4.55 per cent. The rates at renewal time will fluctuate, depending on the economy, but the six-month rate will always be 0.75 percentage points below the bank's prime lending rate. And the five-year term will be 1.15 percentage points below the bank's posted five-year rate.

If interest rates go up sharply in the future, you might want to go long term with both pieces. Scotiabank will let you take the $50,000 at the six-month rate and lock it into a term of up to five years, as long as six months have elapsed since you took out the mortgage. But by using the lock-in provision, you could have half your mortgage renewing in five years and the other half renewing at a later date.”

Downsides are that you have to have at least a 25% down payment, and that you can’t move your mortgage to another lender without incurring costs and paperwork, since Scotiabank treats it as a collateral mortgage.

"This does take away some flexibility to switch among different financial institutions," said Jim Rawson, regional sales manager for Invis.