Good news for first-time homebuyers in Kelowna and area. Thanks to the B.C. government, you can apply for a matching down payment when you purchase a new home. It's not a hand-out. It's a hand-up. A loan that's interest-free first five years of home ownership and one that you don't have to make payments on for the first five years as well.
The B.C. Home Mortgage and Equity Program was announced Dec 15 by Premier Christy Clark. Qualified first-time buyers will be eligible to receive up to $37,500 on a matching grant for a down payment, a move Clark says which will help B.C. residents in the middle-class get into a home sooner.
During her statement to the press, the Premier said that first-time buyers saving for a home are finding that as they save, the price of homes rises at the same time and younger people aren't getting ahead. Plus, not everyone has parents with available capital to help young people invest in their first home.
In November, Canada Mortgage and Housing brought in new mortgage rules making it more difficult for first-time buyers to qualify. That's one hurdle that first-time buyers have to overcome. The other hurdle is scraping together a down payment and this will mitigate that road block. Reaction to the program has been mixed, with the real estate industry and mortgage brokers giving it praise while some economists say it's a ploy by the B.C. government to undermine the federal government's move to protect first-time buyers from being overextended. It may also be a way for the B.C. government to proactively prop up the housing market which some analysts predict is in for a fall in 2017. The loans are available for condominiums, attached homes or single-family homes.
There are several caveats to the new B.C. Home Owner Mortgage and Equity Partnership program
- You must be a Canadian Citizen or a permanent resident of Canada.
- You must have lived in B.C. for at least a year at the time of the sale.
- You must never have purchased a home or property before anywhere in the world.
- You can't purchase a home over $750,000.
- You must pre-qualify for a first mortgage as the loan will be considered a second mortgage.
- You must have saved money for half of the minimum down payment on your own.
- You must not have a combined household income of $150,000 a year.
- The home you purchase must be your primary residence.
- You can't purchase a home as a rental property or a vacation/recreation property.
The loan will be treated like a second mortgage, attached to property. Payments on the loan would be assessed a prime plus 0.5% and would not begin until five years after the closing of the sale. The second mortgage is amortized over 25 years.
The program will help first-time buyers meet some of the federal governments new requirements for down payments. On a $600,000 home purchase, the federal government demands a minimum down payment of $35,000. With the new B.C. program, a first-time buyer with $30,000 saved will be matched that by the B.C. government providing them with a $60,000 down payment.
The program is expected to cost the provincial government $703 million dollars over three years and will cost $130 million to administer. The B.C. government anticipates that 42,000 people will take advantage of the program with an average loan of $16,000 based on homes in the $375,000 to $420,000 price range. This is just an estimate - there is no cap on how many loans the government till give out.
Applications can be made for the program beginning January 16, 2017 and the program will run until the end of March 2020. That means that young people thinking about saving for a home can start now and have three years to save and have time to take advantage of the program. This program will give young people in Kelowna the incentive to start saving because the dream of owning a home is that much closer.
First-time buyers can work closely with their real estate professional to work out what they can now afford and the steps required to make application to the B.C. government beginning in January 2017