5% or 20% Downpayment? Which must I do?

[Neil Da Silva]

Hey guys,

Question: I want to buy a duplex in Ontario. I'm thinking of purchasing it in my personal name and live there so I can put down only 5%. I really don't want to have to live there thought, I rather just rent both units, is there a way around this? Can I put a 5% 

downpayment and not live in the duplex?

[Roy N.]

@Neil Da Silva

If you read the rules around CMHC {or privately} insured, high-ratio mortgages, you will see that they are for owner-occupied properties and that there is a certain window within which you are to take-up residency in the property.

If you secure such a high-ratio, mortgage and do not take-up residency - and never had the intention of taking-up residency - you will have committed mortgage fraud.   Whether the lender or insurer actually follow-on and "catch" you is another matter, but the possibility of unpleasant consequences is there.

Another thing to consider is that you may only hold a single CMHC insured high-ration residential mortgage at a time.  If you apply and secure one for this property, you are technically ineligible for another secured mortgage until the first property has been sold or re-financed under a conventional mortgage.