Down Payment Programs
Borrowed down payment, explained
A structured, insurer-approved way to use borrowed funds toward a down payment — not a loophole, a specific program with its own rules.
What it is
Normally, a down payment has to come from savings, an investment, an RRSP withdrawal, or a gift — not a loan. A Borrowed Down Payment program is the specific, insurer-sanctioned exception: it allows a qualified borrower to use funds from a personal loan, a line of credit, or a credit card toward their down payment, as long as the source is arm's length — meaning not the seller, and not anyone with a financial stake in the sale.
The trade-off is straightforward: since the borrower now has an extra loan payment to make elsewhere, the repayment on that borrowed amount has to be included in their debt service ratio (TDS) calculation when the mortgage is assessed — it isn't ignored just because it funded the down payment.
Who offers it
All three Canadian mortgage default insurers run a version of this: CMHC, Sagen, and Canada Guaranty (Canada Guaranty's version is called Flex 95 Advantage). Sagen's is simply named the Borrowed Down Payment Program.
Sagen's Borrowed Down Payment Program — key features
Applies to insured mortgages at 90.01–95% loan-to-value, where any portion of the down payment comes from borrowed resources. Requires a strong credit profile (minimum 600 credit bureau score). Accepted non-traditional sources include arm's-length borrowed funds (personal loans, lines of credit, credit cards) and gifts from an individual who is not related to the borrower by family or legal relationship — a different rule than a standard gift letter, which usually requires a family relationship. Non-residing co-borrowers are acceptable if they're immediate family and on title; non-residing guarantors are not permitted.
| Property value | Minimum down payment |
|---|---|
| $500,000 or less | 5% |
| Over $500,000 and under $1,500,000 | 5% up to $500,000, plus 10% on the portion above $500,000 |
Standard property eligibility applies (readily marketable residential dwellings, maximum 2 units with 1 owner-occupied). Figures shown reflect Sagen's published program and are subject to change — always confirm current terms directly.
Program page:
Who it's actually for
This program exists for a specific situation: a borrower who can genuinely afford the ongoing mortgage payments — stable income, reasonable overall debt load — but hasn't yet saved the full down payment amount from their own resources. It isn't a way around affordability; the extra loan payment still has to fit inside the borrower's overall debt service ratios, which often makes qualifying harder rather than easier, since a new monthly obligation is added right at the point income is being stretched to buy a home.