10 Facts about the new BC Mortgage Loan program for first-time buyersPosted on January 25th, 2017
- The BC Home Owner Mortgage and Equity Partnership Program helps eligible first-time home buyers who have saved part of a downpayment and can afford a mortgage. This three-year program began accepting applications January 16, 2017 and ends March 31, 2020.
- The program offers a downpayment loan of up to 5% of a home’s purchase price, to a maximum of $37,500, on a home with a maximum price of $750,000. The loan matches the buyer’s downpayment and is interest-free and payment-free for five years.
- Before applying, the applicant must have a partial downpayment saved (or gifted) and must be pre-approved for a high-ratio insured first mortgage for at least 80% of the purchase price. Buyers must have qualified under all rules for a mortgage including the stress test. The combined, gross household income of all individuals on title cannot exceed $150,000.
- The pre-approval letter can come from a mortgage broker.
- To qualify, the home buyer(s) must meet requirements on this eligibility checklist. They must be a Canadian citizen or permanent resident for at least five years, have lived in BC for one year, be a first-time buyer who hasn’t owned an interest in a residence anywhere in the world at any time, and plan to live in the home as their principal residence for the first five years.
- The program is delivered entirely online with a smartphone friendly interface. There’s no physical paperwork. Buyers submit their application here. They must register first. This online calculator helps determine eligibility.
- Only the buyer can complete the application. There are liability considerations. If the buyer claims to have never owned a home anywhere in the world, and the government later discovers this is untrue, the buyer can’t say “My REALTOR® completed the application for me.” If the buyer has questions they can phone the BC Housing information line at 604-439-4727. Staff members speak multiple languages.
- In BC, 87% of apartments, 73% of attached homes, and 19% of detached homes currently on market could qualify for this program, according to Dan Maxwell, Chief Financial Officer of BC Housing.
- After five years, buyers repay the loan or begin monthly payments at a fixed rate equal to the Royal Bank of Canada Prime Rate plus 0.5%. This interest rate is reset at each of the 10, 15 and 20 anniversaries. Loans are due after 25 years.
- The home buyer is responsible for all costs associated with the purchase and financing of their home, including legal costs.
- The applicant gets pre-approval for insured first mortgage.
- The applicant applies to BC Housing (BCH) which issues a confirmation of eligibility letter highlighting details and key dates within five business days. BCH issues a Home Buyer’s Package.
- The applicant makes offer to purchase an eligible home, and provides BCH with copy of Contract of Purchase & Sale.
- BCH issues Conditional Loan Approval Letter for the applicant to take to the lender to finalize first mortgage approval.
- The applicant completes due diligence and removes subjects.
- The applicant provides BCH with the unconditional Contract of Purchase and Sale at least 14 days before closing.
- BCH’s lawyer sends the mortgage package and closing instructions to the applicant’s lawyer.
- The applicant completes the home purchase with their lawyer. The BC HOME loan is secured by a second mortgage registered on title to the home on the closing date. The HOME Partnership loan funds are released following registration of second mortgage.
Example #1 – Home purchase price $475,000, home buyer has saved $11,875
- Minimum downpayment required for an insured first mortgage – $23,750
- BC HOME Partnership loan – $11,875 (equal to home buyer’s downpayment, equal to 2.5% of purchase price)
- Total downpayment – $23,750
Example #2 – Home purchase price $750,000, home buyer has saved $52,500
- Minimum downpayment required for an insured first mortgage – $50,000
- BC HOME Partnership Loan – $37,500 (maximum 5% of purchase price)
- Total downpayment – $90,000
At 3%, this home buyer will save $5,201 in interest payments during the first 5 years of their mortgage compared to if they had purchased the home without BC HOME Partnership.
How many loans?
The government forecasts:
- 42,108 loans will be issued by 2020.
- These will have a total dollar value of $703 million.
- The average loan will be $16,685.