NEW GOVERNMENT PROGRAM FOR FIRST TIME HOME BUYERS
www.gelderman.ca --The Gelderman.ac Real Estate Team Team
BC Introduces
Innovative New Program to Help First-Time Homebuyers
In a move to help BC citizens and residents buy
their first home, the BC government announced today that it is launching a new
program to augment down payments for first-time buyers. The B.C. Home Owner
Mortgage and Equity Partnership program contributes to the amount first-time
homebuyers have already saved for their down payment, providing up to $37,500,
or up to 5% of the purchase price, with a 25-year loan that is interest-free
and payment-free for the first five years. Through the program, the Province is
investing about $703 million over the next three years to help an estimated
42,000 B.C. households enter the market for the first time.
During the first five years, no monthly interest
or principal payments are required as long as the home remains the homebuyer’s
principal residence. After the first five years, homebuyers begin making
monthly payments at current interest rates. Homebuyers will repay the loan over
the remaining 20 years, but may make extra payments or repay it in full at any
time without penalty. The loan must be repaid in full when the home is sold or
transferred to another owner.
To be eligible, buyers must
be preapproved for an insured high-ratio first mortgage (mortgage down payment
is less than 20% of the home price). On completion of the sale, program funds
will be advanced and the loan will be registered as a second mortgage on the
property’s title.1?
Applications will be accepted
starting January 16, 2017. This will be a three-year program with loans
advanced from February 15, 2017 until March 31, 2020.
Eligible homebuyers
All individuals with a
registered interest on title must reside in the home and:
- Be
a first-time homebuyer
- Have
been a Canadian citizen or permanent resident for at least five years
- Have
resided in BC for at least 12 months
- Have
a combined gross income of $150,000 or less
- Have
saved at least half of the minimum down payment they will require
- Must
be pre-approved for the first mortgage before applying
The first mortgage must be
high-ratio insured from an NHA approved lender for more than 80% of the
purchase price.
Eligible Properties
Any legal, self-contained,
mortgageable residence located in BC
- Must
be used as a principal residence for the first 5 years
- Rental
properties and seasonal or recreational properties are not eligible
- The
purchase price cannot exceed $750,000
Home Partnership Loans
- Up
to 25-year term, registered as a second mortgage
- No
interest or principal payments for the first 5 years
- Monthly
principal and interest payments begin in year 6, amortized over remaining
20 years
- Interest
rate for years 6 to 10 set near first mortgage rate at time mortgage is
registered
- Interest
rate reset to near first mortgage rate at years 10, 15, and 20
- Homeowner
may repay in full or part at any time without penalty.
The loan is due and payable
in full upon
- The
home ceasing to be the primary resident in the first 5 years
- Default
on the first mortgage
- Sale
of home or change of ownership
- Any
other default on the Home Partnership second mortgage
Bottom
Line: This is a bold and innovative step to help potential new buyers to meet
the greatest hurdle of first-time homeownership—the down payment. The
Federal Government's new mortgage regulations released in October hit
first-time homebuyers hard, so this program will be welcome relief for B.C.
residents. The B.C. government estimates that it will make more than 42,000 new
loans over the three-year life of this program, amounting to $703 million in
new funding available for qualified first-time homebuyers to come up with their
down payments. This is particularly important for BC, which has the highest
home prices in Canada.
Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
