Recently the Canadian government rescinded the 100% financing programs available to Canadian home purchasers, making it more difficult for individuals to purchase a home without a down payment. When this happened, many first time home buyers were discouraged at the thought of not being able to purchase a home without a down payment. However, there are still some very good options/programs available to purchasers that don't have a down payment saved, which can help them realize their dream of home ownership.
Cash back mortgages - These mortgages offer purchasers cash back up to 5% or higher with select lenders. It is not a loan with separate payments; rather it is repaid through the higher interest rate the lender charges for this product for the term of the mortgage. If you decide to sell your home within the fixed term agreement... there is usually a prorated formula the lender applies to repay the balance. Eg., If the loan is repaid after 1yr of a 5yr term, the payout is 80% of the original cash back amount, 60% after year 2 and so on. This product is designed typically for individuals with good incomes and credit who don't have a down payment saved, but, are able to afford a mortgage payment.
Gifted down payment - Monetary gifts are another viable source for down payment funds. Often time's purchasers will have a close family relative who is willing to provide a down payment and gift letter to enable them to purchase a home.
RRSP's - RRSP's up to $20,000.00 can be used towards the down payment of home. This is known as the federal Home Buyer's Plan. It allows you to withdraw up to $20,000.00 of your RRSP without paying taxes provided you are purchasing a home within that year. Any amount up to $20,000.00 can be withdrawn under this program provided the funds have been in the RRSP for 90 days. The RRSP is then repaid over 15 years of equal payments until the $20,000.00 is paid back into your RRSP account. If you decide not to repay the yearly RRSP portion... the payment does get added to your income and is subject to being taxed.
Bank loan - Lastly, a loan from the bank can be used as a down payment toward the purchase of a home. Provided the loan payments and lending ratios are within a mortgage lenders guidelines, individuals can purchase a home with a borrowed down payment.