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A borrowed down payment — sometimes marketed as a “flex down” option — is a down payment funded in whole or in part through borrowed money, such as a personal loan or line of credit, rather than the borrower’s own savings or a gift, and is only permitted by some Canadian lenders and insurers under specific conditions.
Borrowing the down payment adds a hidden layer of debt on top of the mortgage itself, so the payment on that borrowed amount must be counted in the borrower’s total debt service ratio even though the funds are being used to create equity, not to cover a housing cost.
Because of this added risk, default insurers and lenders limit or restrict borrowed down payments on certain high-ratio programs, and not every lender offers a flex-down option at all. Where it is available, the maximum amount and terms vary by lender and insurer.
Payment counted in TDS: the payment on the borrowed portion is added into the borrower’s total debt service ratio, since it’s an additional debt obligation.
Restricted for some insured files: default insurers and lenders limit or restrict borrowed down payments on certain high-ratio programs; rules vary by insurer and lender.
Different from a gift: unlike gifted funds, a borrowed down payment must be repaid by the borrower and is treated as debt, not equity contributed at no cost.
Lender-by-lender availability: not every Canadian lender offers a borrowed or flex-down option, and where available, the terms and maximum amount vary.
Definitions reflect Canadian federal and provincial rules as of the “Updated” date above. Not advice for any specific file.
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