You may have heard about a new program called the B.C. Home Owner Mortgage and Equity Partnership program which was introduced by BC Housing to support first-time home buyers.
Here are some highlights of the new program:
- The program will match up to 5% of the purchase price of your first home in the form of a repayable loan.
- You don’t pay any interest or principal in the first five years.
- The program starts January 16, 2017 and will run to March 31, 2020.
To be eligible, you must:
- Reside in the property
- Be a first-time home buyer
- Be a Canadian citizen or permanent resident for at least five years
- Have resided in B.C. for at least one year
- Have a combined gross income of $150,000 or less
- Have saved at least half of the minimum down payment required
- Be pre-approved for a first mortgage
The maximum purchase price is $750,000 and the maximum loan amount from the program is $37,500 (5% of the purchase price).
It’s important to note that the funds are borrowed and are repayable. While you won’t pay any interest or principal in the first five years, you will have to make payments on the loan starting in the sixth year, with the payments spread over the following 20 years. The interest rate will be set near the first mortgage rate at the time the mortgage is registered. You also have the option of paying off the loan in part or in full without penalty anytime. If you default on the first mortgage, sell the property, or it ceases to be your principal residence, the B.C. Home Owner Mortgage and Equity Partnership program loan would be payable in full.
Is this program right for you?
This depends on your financial circumstances. If you think that five years from now you’ll be earning enough that you can accommodate an additional payment, it may very well be a viable option. If you were to take the maximum loan, the payments would be about $215 per month over the remaining 20 years.
The first step in applying for the B.C. Home Owner Mortgage and Equity Partnership program is to obtain a pre-approval for a first mortgage, at which point you should discuss this new program with your mortgage professional. The program should be looked at as a tool that can help you achieve home ownership, but should be examined in conjunction with your overall financial plan.