There are many would-be first time homebuyers in British Columbia who’ve faced the same hurdle over the years. They’re able to afford their projected mortgage payments, but coming up with down payments that are often staggering in size is an insurmountable obstacle. It’s one truth that no amount of real estate tips and advice can get you past.
Some of these folks may now have a solution to their predicament with the BC Provincial Government’s new Home Owner Mortgage and Equity Partnership Program. With it, the government would match these buyers’ savings – up to $37,500 or 5% of the home’s purchase price.
At first glance, it’s easy to see this as a generous and benevolent gesture on the part of the Liberal government to help homeowner’s enter a market that’s very daunting, particularly so for the Lower Mainland of the Province. On the other hand, however, it’s important to keep in mind that the Federal Government instituted the country-wide down payment requirements it did to exclude buyers who might be tempted to overextend themselves on properties they won’t be able to afford should interest rates increase.
In contrast to all the ‘feel good’ nature of this new program, that second part of it is something that really must be remembered as it’s an age-old maxim – If you can’t afford a home based on the existing market and its projections, you really shouldn’t try to purchase one.
Differing Perspectives
The program would only apply to homes worth less than $750,000. A buyer must be able to pre-qualify for a mortgage and have a gross household income of less than $150,000. Applications open Jan. 16, and the program ends March 31, 2020. The government would put a second mortgage on a property to reflect the amount it loaned, but not require any interest payments or payments on the principal for the first five years. After that, the 20-year repayment plan would be set at the prime lending rate plus 0.5 per cent, leaving the homeowner to pay back both the original mortgage and the down-payment loan at the same time.
It was greeted with praise by developers, the real estate industry, mortgage brokers and some housing analysts. Their argument is that it will help those who would already qualify for mortgages speed their entry into the market, and some adding further that it will continue to buoy the market in the face of a projected downturn this year (only in part due to the foreign buyers tax – but we won’t digress).
Proponents of the program state it keeps the housing continuum moving along, and that an influx of first-time homebuyers is very much needed. Critics counter with the fact that it does nothing to address the reality that “we continue to have too much demand chasing to little supply” as one industry expert put it. In response, proponents – while agreeing that supply of new housing in Metro Vancouver is limited relative to the demand – believe that this will offer a greater incentive to builders and developers to initiate new projects.
NDP housing critic David Eby said the province is encouraging buyers to go deeper into debt. He said it flies in the face of the Canadian Mortgage and Housing Corporation’s new stress tests, designed to gauge whether a buyer could still pay their mortgage if interest rates rose to the five-year standard rate of 4.64 per cent.
Differing perspectives for sure, and before we wrap it up for this week here are the eligibility requirements for the program:
- Have saved a down payment amount at least equal to the loan amount for which they are applying from government.
- Have been a Canadian citizen or permanent resident for at least five years.
- Have lived in B.C. for at least one year prior to the sale.Are a first-time buyer who has not owned an interest in any residential property anywhere in the world at any time.
- The home must have a purchase price of less than $750,000.
- The buyer must already be able to qualify for an insured high-ratio first mortgage for at least 80 per cent of the purchase price.
- The combined gross household income of all people on title must not be more than $150,000.
- What do you think? Is it a judicious decision on the part of the BC Liberals to introduce this program? Will it be a benefit or a detriment in the long term?
Increasing numbers of ready homebuyers is going to be a plus for you as a realtor no matter which way you slice it, so sign up with real estate leads and have qualified online-generated leads provided to you exclusively for your region!
