The day after the brick triplex near Dufferin and Sheppard went up for sale, 29-year-old Jane Fonseca went to check it out. It was perfect for the recently hired teacher and her fiancé: three spacious, well-maintained units, and right next door to her mother's house. There was just one hitch: The place was listed for $429,000, and neither Ms. Fonseca nor her fiancé had any money. But even in Toronto's overheated real-estate market, that wasn't a problem.

Until recently, the Canadian mortgage industry was uninterested in lending money to aspiring homeowners unless they had good credit and enough savings to cover at least 6.5 per cent of a home's purchase price -- enough for a 5-per-cent down payment plus closing costs. But that changed last year when the industry noticed the explosive growth of a scrappy Toronto lender, Xceed Mortgage Corp., that targets prospective buyers with little cash or spotty credit histories.

Now, the "sub-prime" mortgage -- which can allow a borrower to purchase a home without putting down any money -- is a hot product. And Torontonians who would once have regarded themselves as long-term renters now find themselves owning homes -- and, critics say, sometimes saddled with more debt than they can afford.

Less than 48 hours after Ms. Fonseca first spied the "For Sale" sign, their real-estate agent informed them that their bid of $440,100 had won out. They were now homeowners. And they wouldn't have to spend a penny.

"It was a dream. A whirlwind. . . . When we found out we had won, we were ecstatic," Ms. Fonseca says. The deal closed in August, and the couple plan to move in this summer, once they are married.

Xceed and its fast-growing competition -- which includes American outfits such as Wells Fargo and GMAC Residential Funding, as well as GE Money, which began lending this month -- have changed the rules of the game. Most banks now offer some form of no-money-down financing. It's an appealing proposition in a city that has seen prices rise to the point that a standard 5-per-cent down payment can easily run to $25,000.

The typical cash-back scenario sees a purchaser using short-term debt, such as a line of credit, credit card or a relative's savings, to place a deposit on a home. (Ms. Fonseca's mother lent the couple the money.) When the mortgage money arrives on the closing date, the lending company pays off the purchase price, plus whatever the buyer paid for the deposit -- hence the "cash-back" label. In some cases, the loans even provide 2 or 3 per cent over and above the home's purchase price, enough to pay for closing costs and some furniture.

John Meehan, president of the Toronto Real Estate Board, says he'll recommend this form of financing to his 20-year-old daughter when she finishes school.

But not everyone is so enamoured of the new lending practices. "When it comes to banks, nothing is ever free," says Ed Estreicher, the president of Wildwood Capital Inc., a mortgage brokerage.

Indeed, the new financing has its drawbacks. Ms. Fonseca's lender, GMAC Residential Funding, gave her a mortgage of $470,907, or 107 per cent of the value of her new home. That includes a cash-back payment of 3 per cent of the purchase price. But it also includes an administration fee of 4 per cent -- in Ms. Fonseca's case, $17,604. A similar fee exists with traditional mortgages to pay for insurance, but such payments usually run only about 2.75 per cent -- a difference of thousands of dollars.

Also, Ms. Fonseca's interest rate of 6 per cent on her principal is at least 1.25 points higher than it would have been with a traditional mortgage. All told, the loan of $470,800 will cost her and her future husband $1,600 every two weeks, an amount they are able to afford on two teachers' salaries because they plan to cover half of it with rent from their triplex's other units.

Take Ken Munro. A 39-year-old customer service representative with a Mississauga furniture hardware distributor, Mr. Munro is married with three kids and until recently rented a townhouse in Burlington, where he and his wife paid $1,100 a month. Combined, the couple made about $80,000 annually, but struggled to save enough for a down payment. In April, they decided to shop around anyway.

A bank turned down their mortgage application. So Mr. Munro turned to the non-traditional lenders, eventually receiving a pre-approval from Xceed for up to $240,000 at 7.2 per cent for a five-year term.

He found a four-bedroom place in Hamilton for $160,000, and the family moved in at the end of October, with mortgage payments of $1,400 a month. "Probably, over the years, I've paid $160,000 in rent," he says.

Broker Ann Pope of Assured Mortgages says she gets asked perhaps once a week about cash-back financing, and only 30 per cent of those asking actually qualify. The classic candidates are recent graduates entering stable, relatively high-paying professions, such as new doctors, lawyers or, like Ms. Fonseca and Mr. Musharbash, teachers.

With interest rates climbing and the real-estate market cooling off, there's a possibility someone like Ms. Fonseca might not be able to sell her home for what she paid for it. And with depreciation of even 1 or 2 per cent, she could owe the mortgage company $10,000 when she wants to sell.

"We don't think that's going to happen," Ms. Fonseca counters. "We're both teachers in unions, so our jobs are secure. And we think it really unlikely that prices will actually drop.

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