24 Jan The BC Home Owner Mortgage and Equity Partnership (BC HOME Partnership)
In December, Premier Christy Clark announced a program to assist B.C. first-time home buyers to accumulate their down payment.
The application process is now open and BC Housing Minister Rich Coleman advises that as of January 16, 2017 there were 29 applications submitted. If you are interested in applying, the application form can be found here: BC HOME Partnership Program.
The terms of the loan are as follows:
- the loan will be amortized over 25 years;
- the first five years of the loan will be interest free with the remaining term at current interest rates;
- it will be available for purchases up to a maximum purchase price of $750,000.00 and the total loan amount available will be up to a maximum of 5.0% of the purchase price (thus the maximum loan you could receive based on a purchase price of $750,000 is $37,500.00);
- the loan amount must be matched by the buyer(s);
- the loan is only available for purchases that complete after February 15, 2017; and
- it is recommended that you apply for the loan after you save sufficient funds for your down payment but before you start making offers on properties.
The criteria to qualify for the loan include the following:
- the applicant must be a Canadian citizen or permanent resident for five years;
- the applicant must have a household income under $150,000.00 per year;
- the applicant must be pre-approved for a high ratio mortgage; and
- the home being purchased must be used as the principal residence of all individuals registered on title for five years after purchasing the property.
If successful, the program may assist some buyers with purchasing a property that they could not otherwise afford and/or reduce costs of ownership. For example, with the program a buyer who currently has $50,000.00 set aside for a down payment could access an additional government loan in the amount of $37,500.00, thus making a down payment of $87,500.00. The first five years of the government loan would be interest free so the buyer would save approximately $5,201.00 in interest during the interest free period (assuming the buyer received $37,500.00 and an interest rate of 3.0%).
However, the program does raise some questions:
- Will this further drive up prices in the real estate market?
- When the interest free period expires, will the owner be able to manage the mortgage payments?
- Will the owner be able to borrow less from the conventional lender as the payments on the government loan will be part of the calculation for how much the borrower qualifies for? Typically, the more expenses/debt a borrower has, the less the borrower will qualify for.
- Given that many conventional lenders do not allow a second mortgage to be registered against title to a property, will the lenders allow this government mortgage?
If you are purchasing or selling a property and need assistance with the transaction, feel free to call Sitka Law Group. We would be happy to assist you with the transaction and answer any questions that you may have.
Sitka Law Group is conveniently located on Shelbourne Street near the intersection of the borders of Victoria, Oak Bay and Saanich.