on December 15, 2016 The BC Liberal Government announced today that it is implementing a program to provide down payment assistance to qualifying first time home buyers. The new program is called the B.C. Home Owner Mortgage and Equity (B.C. HOME) Partnership program, and will provide a loan to a qualified first time buyer to assist with the down payment on the purchase of a principal residence. The loan amount will match the buyer’s own down payment savings, to a maximum loan amount of $37,500, and it will be interest free for the first 5 years. After the grace period, the loan will require payments of interest and principal with a rate of Prime + 0.5% and a 20 year amortization. The loan will be registered to the property title as a second mortgage to secure the loan.
In order to be eligible, you have to:
- Have been a Canadian citizen or permanent resident for at least five years.
- Have resided in British Columbia for at least one year immediately preceding the date of application.
- Be a first-time buyer who has not owned an interest in a residence anywhere in the world at any time.
- Use the property as their principal residence for the first five years.
- Purchase a home that has a purchase price price of $750,000 or less (excluding taxes and fees).
- Obtain a high-ratio insured first mortgage on the property for at least 80% of the purchase price.
- Have a combined, gross household income of all individuals on title not exceeding $150,000.
- Have saved a down payment amount at least equal to the loan amount for which the buyer applied.
The B.C. HOME partnership program will begin taking applications early next year (Jan. 16th, 2017) for purchasing closing Feb. 15th or after.
The application process is roughly outlined as follows:
Step 1: Get preapproval for an insured first mortgage from your financial lending institution.
Step 2: Apply to BC Housing for the Home Owner Mortgage and Equity (HOME) partnership loan. If you are eligible, you will receive confirmation of eligibility and Homebuyer’s Kit which includes information for your Lender, Real Estate Agent, and Lawyer/Notary Public.
Step 3: Find your home and provide the details of your planned purchase to BC Housing for approval.
However, as right now most lenders do not approve of second mortgages and also have special rules around borrowing for the down payment, it will be a few weeks before we get details on how they and the mortgage insurance companies will consider this program as part of the pre-approval process (Step 1).
The lenders I spoke to today have stated that they will accommodate the program, which is good initial news. However, since the government did not give lenders or industry professionals advance notice of this announcement, it will be several weeks before we know exactly how the lenders and insurers will adapt. For example, at this point it is unclear if and how using this program will affect the mortgage insurance premiums that borrowers will have to pay (currently mortgage insurance costs more when down payment money comes from a borrowed source). Also, as stated above, many lenders do not currently permit buyers to have second mortgages registered on the property as part of the purchase.
As implementation details are announced from the lenders and insurers, we will pass them along and try to provide some clear context and scenarios to illustrate how the new program could work for you and your family.
For more information on the B.C. HOME Partnership program, visit: https://housingaction.gov.bc.ca/tile/home-owner-mortgage-and-equity-partnership/
If you have any questions in regardless to this program and how it affects your mortgage and home-buying opportunities, please send us an email or give us a call today!
Mackenzie Gartside
Lead Mortgage Consultant
Mackenzie Gartside & Associates – Select Mortgage
525 Cliffe Ave, Courtenay, BC V9N 2J5
Tel: 250.331.0800 / 1.888.808.0802
Cell: 250.792.1618
Fax: 250.331.0808 / 1.888.846.0804
Email: mgartside@comoxmortgages.com
Web: www.comoxmortgages.com
