A new government backed loan program was announced by Premier Christy Clark on December 15, 2016. This program includes lending homebuyers in BC up to $37500 to first time home buyers. The program matches the amount that first time buyers have saved towards down payments and up to a maximum of $37500 and no more than 5% of the home’s total value. The loan only applies to homes with a total purchase value of $750,000 or under. It’s also only for certain qualified buyers with insured high ratio mortgages (with a down payment of less than 20 percent).
This program is especially designed for helping home buyers who already qualify for an insured high ratio mortgage but usually cannot afford the initial down payment.
It makes the dream of owning a home within the reach of the middle class in BC. The good part is that this 25 year loan is interest free and there are no payments required to be made for five years. The interest after five years will be as per the current market rates.
There are a few conditions however:
• All applicants must be first time home buyers
• Applicants must also have a total household income of less than $150000.
• They must have been citizens of Canada for the past five years.
• They must have lived in the province for at least two years.
• The applicants also must have paid taxes in Canada for at least one year.
• This program is funded from the province’s property purchase taxation, and also includes the foreign buyer tax.
• The program will last for a minimum three years and there is no cap on the amount of money or the number of applicants that can avail this facility.
Is this program great or a terrible plan? Here are a few things to know and understand:
This new program will definitely encourage already stretched home buyers to borrow money so as to put down a less down payment than they otherwise might have. The program stimulates demand without improving supply. The program might just increase prices. The rise in interest rates could also mean a widespread repayment crisis when the loan repayments start kicking in.
Interest rates by then are expected to be higher and you might have to start the repayment at those higher rates. However, if you do take advantage of the loan and do buy a home, remember that you need to keep saving and use those savings to pay off chunks of your mortgage. This new money is like a second mortgage and make sure that you carefully consider and plan it’s repayment.
So, even though this new down payment loan program empowers real estate buyers with the bulk money that they require to buy their first dream home, it is only wise to take it after considering all the implications and the financial changes that the five years will bring and take a prudent decision – after all it’s like a second mortgage!
Find West Vancouver real estate listings and browse homes for sale at Nazproperties.com, Naz Allahyari is a Canada’s leading and full-time Vancouver Real Estate Agent specializes in homes for sale in the West Vancouver, Yaletown, West Vancouver, Coal Harbour, and Downtown Vancouver.
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