I have received a number of inquiries about the new B.C. Home Owner Mortgage and Equity Partnership, so thought I would write a follow up to clarify what is required.
Here are some requirements for anyone who appears on the title of the home:
- Be a Canadian citizen or permanent resident for the last five years
- Have lived in British Columbia for at least the full 12 months preceding your application.
- Be a first-time homebuyer who has not owned an interest in a principal residence anywhere in the world at any time and has not received a first-time homebuyer's exemption or refund
- Purchase a home that is $750,000 or less
- Be eligible for a high-ration insured mortgage for the home
- The combined, gross household income of all individuals on title must not exceed $150,000
- The home being purchased must be used as the principal residence of all individuals on the title for the five years after purchasing.
To confirm Canadian citizenship, the applicant is required to provide a birth certificate, permanent resident card or a Canadian citizenship card.
The applicant is also required to provide a valid secondary piece of identification which includes a photo.
This may include a driver's licence, passport, BCID or secured certificate of Indian status.
A copy of the most current Notice of Assessment from Canada Revenue Agency will be required to confirm that the household income is less than $150,000.
Residency can be confirmed from the B.C. drivers licence or from Notice of Assessments.
The applicant is to be a first time homebuyer who has not owned a principal residence anywhere in the world. A search will be conducted by the lawyer to confirm for the lender.
To qualify for an insured mortgage the applicant will need to fill out an application. This can be done online or in person. The online application should be secure because the applicant will be required to provide personal information.
The purchaser will need to show accumulation of the downpayment over the last 90 days for the matched five year interest free loan.
Employment will need to be confirmed with a current employment letter, paystub and possibly the last two years Notice of Assessments.
A credit report will be obtained to check credit rating and confirm balances and payments on any outstanding debt.
The property that is purchased will need to be less than $750,000 under this program. If the property is over $500,000, then the purchaser will need half of five per cent of $500,000 ($25,000) plus 10 per cent of the balance.
For a purchase of $750,000 this would be half of $25,000 plus 10 per cent of $250,000 or $25,000.
The province will provide the other $25,000 in an interest free loan for 5 years registered as a second mortgage. The interest rate will be half or a per cent over the one year rate at the time of the advance starting in the sixth year.
If you require more information on this program or would like to be prequalified for the new provincial loan please call 250-862-1806 or email me at [email protected].
B.C. Home Owner Mortgage and Equity Partnership Program
Premier Christy Clark announced on Dec. 15 a new down-payment assistance program to help B.C. residents come up with the minimum down payment to buy a home.
The B.C. government announced that it will match an eligible first-time home buyer’s down payment funds up to $37,500.
The funds will be supplied in the form of a 25-year second mortgage. During the first five years, the mortgage will not require payments and will not accrue interest until the sixth year.
Feedback on this program was provided to the government from the Canadian Mortgage Brokers Association of B.C.
The CMBA-BC believes this program will assist many first-time buyers who are struggling to save enough money for a down payment.
To qualify for the program, first-time buyers should get pre-approved for an insured first mortgage.
The matching repayable loan will provide first-time buyers with up to five per cent of the purchase price to a maximum of $37,500.
This repayable loan will be registered as a second mortgage with a term of 25 years. The loan is payment and interest free during the first five years.
In year six, the loan will be amortized over the remaining 20 years and will have an interest rate, for years six to 10 of one-half per cent over the current first mortgage rates.
The rate will be set in year one. The interest rate on the second mortgage will be reset every five years in year 10, 15 and 20.
The entire loan is open to repayment in full or part at any time without penalty. The payments although they don’t start until year six should be included in the borrower’s debt load.
This program is set to begin on Jan. 16, with loans advanced from Feb.15 to March 31. The following are the qualification criteria for the new BC Home Partnership Program for all applicants on title:
- Reside in the home
- Be a first-time homebuyer
- Be a Canadian citizen or permanent resident for five years
- Have resided in B.C. for at least one year
- Have a combined gross income of $150,000 or less
- Have saved at least half of the minimum down payment they will require
- Be pre-approved for a first mortgage before applying.
In addition, the property must meet certain criteria to qualify under the B.C. Home Partnership program:
- A legal, self-contained, mortgageable residence (not rental or recreational) locate in B.C.
- Used as the homebuyer’s principal resident for the first five years
- Under the purchase price of $750,000
Here is an example. A first-time buyer of a $500,00 property has $25,000 for the down payment with $12,500 from their own resources and $12,500 from the B.C. Home Partnership Program.
The structure of the financing would be as follows (assuming 2.90 per cent current rate)
- $500,000 Purchase price
- $ 25,000 Down payment
- $475,000 Base mortgage amount
- $18,287.50 Non-traditional CMHC premium (3.85 per cent)
- $493,287.50 Net first mortgage
- $12,500 Net second mortgage
First mortgage at 2.90% Second mortgage at 3.40% Total monthly payment
- Years 1-5 $2,304 $0 $2,304
- Years 6-10 $2,304 $72 $2,376 (assumes same rate on 1st)
Over 55 per cent of first time buyers use a mortgage broker and we would be pleased to pre-qualify you for this program or answer and questions you may have 250-862-1806 or email [email protected].
The first question I usually get when a potential client calls me is, what is your mortgage rate for five years?
It makes me wonder if that is the only thing that's important when you are shopping for a mortgage.
I was speaking with a financial planner colleague and he told me he almost never has clients call him and ask the price of a certain mutual fund or stock.
We began to talk and realized that mortgage brokers by advertising "best rates" and "lower rates than your bank" have trained their clients to ask for the best rate.
Is rate really all that important when you are talking about the largest debt you probably will ever have?
When clients choose a financial planner, they usually ask questions about the planner's experience, outlook on the market, past record with clients' portfolios, but certainly not rate or price.
Mortgage clients ought to be doing the same thing.
With all the current news about interest rates rising to further cool off the real estate market, it's important my clients have a plan to help them prepare for the payment shock in two to five years when interest rates may be up as much as two per cent.
When was the last time your bank sent you an email advising you that their mortgage rates were going up and that you should increase your payment to keep your risk down?
When was the last time your mortgage company called and told you over the last two to three years that your rate was higher than the current rate and perhaps you should investigate refinancing at a lower rate to save you money?
If you would like to have these strategies and more for your mortgage, then I suggest you give us a call at 250-862-1806.
If you have an existing mortgage you can also sign up on our email list so that you will be notified when your lender increases their rates.
Remember you should have someone who wants to help you manage your mortgage just like a financial planner manages your investment.
How to qualify for more under the new mortgage rules
With the change of mortgage rules requiring borrowers to qualify at the prescribed or posted interest rate that is approximately two per cent higher than the discounted rates, it time to come up with options for qualifying.
The change in qualification was designed to "stress test" borrowers. The government wants lenders to ensure that if mortgage rates rise borrowers will be able to make their mortgage payments when they have to renew at a higher interest rate in five years.
The new rules mean that, on average, a borrower qualifies for about 20 per cent less that they did a month ago.
Here are some strategies to help you qualify for more:
1) Save more down payment.
- For every $10,000 down payment you save that will shave approximately $56 off your monthly payments.
- Also if you are able to save 10 per cent rather than less than 10 per cent, you will qualify for a lower insurance premium through CMHC, Genworth or Canada Guaranty.
- The premium tiers are at five per cent down — 3.6 per cent premium, 10 per cent down — 2.40 per cent premium and 15 per cent down —1.80 per cent premium added to the mortgage and nothing for 20 per cent down.
2) Pay off some debt.
- Some lenders will allow you to use your unused TDS — total debt service ratio of 40 per cent to qualify for a mortgage.
- For example, if you have a credit card or line of credit with $10,000 owing the lender is required to use a three per cent or $300 payment in your debt service calculations.
- That same $300 will allow you to qualify for another $53,000 in mortgage money.
3) Find a property with a suite.
- The lender is allowed to include 50 per cent of the rental income for the suite into your income to qualify you for a mortgage.
- If you have a suite that has a market rent of $1,200, that may mean an extra $42,000 in mortgage funds.
4) Get a co-signer.
- Some times the purchase of a property may make sense because the borrower is self-employed and makes more money than then show for qualifications or maybe the child has demonstrated that they are able to pay a comparable rent payment.
- In these cases, the lender will accept a parent or related person to co-sign the mortgage to allow a larger mortgage payment.
If you have any questions about this or any other aspect of qualifying for a mortgage under the new mortgage rules, please call 250-862-1806 or email me at [email protected].
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