Down-payment blues

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].


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About the Author

Tracy Head and Laurie Baird help busy families find mortgage solutions. Together they have more than 45 years of experience in the mortgage industry.

With today’s increasingly complicated mortgage rules, Tracy and Laurie spend time getting to know the people they work with and help them to better understand the mortgage process. They support their clients before, during, and after their mortgage is in place.

Tracy and Laurie work closely with their clients, offering advice and options. With access to more than 40 different lenders, Tracy and Laurie are able to assist with residential, commercial, and reverse mortgages in order to match the needs of their clients with the right mortgage package.

They work closely with their clients to find the right fit, and are around to provide support for years down the road!

Contact them at 250-862-1806 or visit http://www.okanaganmortgages.com

Visit their blog at https://www.okanaganmortgages.com/blog


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