The provincial government has offered a financial lifeline to first-time home buyers to meet the mortgage down payment requirement for a home to a maximum value of $750,000.
Premier Christy Clark unveiled the new initiative at a press conference Thursday in Surrey, saying her plan, to be administered through BC Housing, will make the dream of owning a home more affordable for first-time buyers.
“We’ve invested in affordable rental housing, we’ve invested in transitional and emergency housing, and now we’re partnering with first-time buyers,” Clark said.
Called the B.C. Home Owner Mortgage and Equity Partnership, the program will match the amount a first-time buyer has already saved for a new home, providing up to $37,500 or five per cent of the purchase price, with a 25-year loan that will be interest- and payment-free for the first five years.
After those first five years, homebuyers will have to make monthly payments at current interest rates.
The province has targeted an investment of $703 million in this program over the next three years to help a projected 42,000 B.C. households enter the real estate market for the first time
Those estimates are based on recent ministry of finance and Canada Mortgage and Housing Corporation first-time buyer statistics.
The Okanagan real estate industry will greet this new program as an incentive initiative the provincial government appears to have well thought out, said Elton Ash, regional vice-president of ReMax Western Canada based out of Kelowna.
Ash said while variations of this idea has been carried out before dating back to the ‘70s, he feels it will be very beneficial to Okanagan buyers because the $750,000 home price ceiling offers the chance to buy a single-family house.
“In Vancouver or other parts of the Lower Mainland, the focus of this will probably be more towards condos and townhouses because of the value of single family homes,” said Ash.
“But across the Interior and the north end of Vancouver Island, it will have a little broader impact.”
He said the single largest hurdle to overcome in any real estate deal is the down payment.
“It’s always the most difficult part of the deal. Qualifying for a mortgage using the combined income of a couple is the easiest party. It’s getting the down payment scraped together and the cash needed for the completion costs on the transaction are the toughest parts. So this new program will help that,” Ash said.
The Canadian Home Builders Association of B.C., also applauded Clark’s announcement, calling it a positive step for first-time home buyers.
“If many first-time buyers can not enter the housing market, the long-term housing continuum is at risk,” said Neil Moody, chief executive officer of the CHBA BC.
“Some first-time buyers are currently relying on family to support their home purchases, but not everyone will be able to benefit from inter-generational wealth transfers in the future.”
Among the requirements to participate, first-time buyers must have pre-qualified for a high ratio first mortgage – meaning a mortgage down payment of less than 20 per cent of the home price – and have a combined income not exceeding $150,000.
Other qualifying factors include:
* Have been a Canadian citizen or permanent resident for at least five years, and resided in B.C. at least one year prior to the date of application.
* Use the property as a principal residence and not for investment purposes for at least the first five years.
*Saved a down payment amount at least equal to the loan amount for which the buyer applied.
One of the financially benefits of the program is first-time buyers who have a sufficient down payment can still apply for the additional funding support, which will help reduce interest costs on their down payment.
For example, on the maximum $750,000 home purchase, if the first-time buyer has a sufficient down payment of $50,000 in place, the maximum $37,500 amount can be applied for and added to reducing the overall mortgage cost.
That would save more than $5,000 in interest payments off the principle over the first five years with the additional boost to the down payment, but it will still have to be paid back starting at the five year mark.
The application process will start Jan. 16, 2017, and will be administered by online application only.
For more information, check out the website homeowners services www.bchousing.org.