Recently, the BC Liberal Government made waves by introducing the “BC Home Owner Mortgage and Equity Partnership.” For your own reference, you can go to the BC Housing website to read more about this new program, but I will highlight some of the main features, as well as some of the potential pros and cons of the program below.
How Does the Program Work?
This new program is designed to assist British Columbia residents who are eligible first-time homebuyers by providing a down payment assistance loan. The BC Home Partnership Loan will match your down payment up to a maximum 5% of the purchase price on a home, to a maximum of $37,500. The maximum purchase price is $750,000.
This loan is repayable over 25 years, but the first 5 years of the loan accrue zero interest and require no repayment. Starting in the 6th year of the loan, interest will begin to accrue, and the borrower(s) will begin to make payments using a 20-year amortization (the original 25 years minus the 5 year grace period). The interest rate will be calculated as Royal Bank of Canada Prime Rate plus 0.5%, and will be reset to the new prime rate + 0.5% on the 10th, 15th and 20th anniversary dates.
The eligibility requirements can be a bit tricky. In order to qualify for the BC Home Partnership Loan, buyers must:
- Be a Canadian citizen or permanent resident that has resided in Canada for at least five years
- Have lived in British Columbia for at least the full 12 months preceding the application
- Be a first-time homebuyer who has not owned an interest in a principal residence anywhere in the world at any time, and has never received a first-time homebuyers’ exemption or refund
- Purchase a home that is $750,000 or less.
- The combined, gross household income of all individuals on the title mustn’t exceed a GROSS annual income of $150,000
- The home being purchased must be used as the principal residence of all individuals on the title for the five years after purchasing
- Be eligible for a high-ratio, insured first mortgage for the home
- Your primary lender on the high-ratio mortgage must also agree to have the BC Home Partnership Loan registered on title as a second mortgage
Recall that a new, separate, regulation for home purchasers with less than 20% down (i.e. requiring a high-ratio mortgage) states that the borrower(s) must pass a “stress test”. The stress test will measure the borrowers’ ability to pay their mortgage using the Bank of Canada’s 5-Year Fixed Rate (currently, 4.64%), rather than using the actual rate offered by the bank (currently, mid-2% range).
Detractors of the new program feel that injecting new money into the equation will simply encourage more spending, and ultimately, will fuel higher real estate prices – especially in the Greater Vancouver Area.
Supporters of the new program are quick to counter that this program is available for house purchases anywhere in BC, and that detractors are ignoring the potential benefits for non-GVA residents.
Here are a few handy links: