Optimism For Future First Time Homebuyers
December 15th, the B.C. Provincial Government shared that it will begin offering financial assistance to B.C. first-time home buyers in regards to their down payment. They estimate that 42,000 new first-time home buyers will take advantage of this program over the next three years.
What the B.C. Government Will Provide:
– A matched loan only to be used as funds for making a down payment on an eligible home
– Maximum available funds will be $37,500 or 5% of a home’s purchase price
-Maximum 25 years to repay
– 5 years of no required payments (includes no principal payments and no interest payments)
– This loan will be registered as a second mortgage on the newly purchased home
When This Program Begins:
– January 16th, 2017 applications will be accepted and this program expires March 31, 2020
To Qualify for This Program:
– Must reside in the home – Must be a First-Time Home Buyer (click here to see those qualifications)
– Property must remain principal residence for 5 years
– Property must cost less than $750,000 and not be used as a recreational or rental property
– Have resided in BC for at least 1 year
– Have a combined gross income of less than $150,000
– Have saved half the minimum down payment (2.5% of property’s purchase price)
– Have been pre-approved for a 1st mortgage before applying
Privileges of This Program:
– No prepayment fees (make lump sum payments or pay entire debt early at any time)
– No interest will begin accumulating until after the first 5 years have expired
Without this program, if you wanted to buy a $500,000 home for example, you would need a minimum down payment of $25,000 (5%) plus 1.5% for closing costs. With this program, the government will match a first-time home buyer’s down payment, up to 5% of the property’s value. So your $25,000 down payment can now be $12,500 because the government will lend you the remaining $12,500 (you still need 1.5% for closing costs).
If you originally wanted to make a 20% down payment and avoid insurance premiums, you can now do this with 15% of your own money down as the government will lend you the remaining 5%.
It is unclear the significance this program will have on housing prices and how it will affect demand here in BC- only time will tell us that. For right now though, future first-time home buyers can begin to feel very optimistic as the BC government has opened a door of opportunities for them, 3 months after CMHC’s news from October 2016 where they announced changes to qualifying requirements- affecting the majority of future first-time home buyers.
Below is a chart showing the steps a first-time home buyer must complete in order to successfully use this program in their future purchase. In order to become pre-approved with a lender, please contact your Dominion Lending Centres mortgage professional so we can begin that process (which is free).
By: Ryan Oake