Saving for a down payment on a first home purchase can be hard for first-time home buyers. The British Columbia government recently partnered with new home buyers to help them achieve their minimum down payment. Starting as of January 16, 2017, the new British Columbia Home Owner Mortgage and Equity Partnership Program (the “HOME Program”) is intended to help first-time home buyers, that meet certain criteria as listed below, with their down payment to facilitate the purchase of their first home. The HOME Program will match down payments that first-time home buyers have already saved to help get them to the minimum down payment required by most lenders. It is a 25 year loan of up to $37,500.00 or 5% of the purchase price. The loan is interest free for the first five years and, after that, home buyers will make monthly payments at current interest rates. Home buyers will repay the loan over the remaining 20 years, but have the option to make extra payments or repay it in full at any time without penalty. The loan must be repaid in full when the home is sold or transferred to another owner.

Eligibility

To qualify for the HOME Program, all home buyers must reside in the home as a primary residence and each owner must:

• have been a Canadian citizen or permanent resident for at least five years;
• have resided in British Columbia for at least one year immediately preceding the date of application;
• be a first-time buyer who has not owned an interest in a principal residence anywhere in the world at any time;
• use the property as their principal residence for the first five years of ownership of the home;
• purchase a home that has a purchase price of $750,000.00 or less (excluding taxes and fees);
• have obtained an insured first mortgage on the property for at least 80% of the purchase price;
• have a combined, gross household income of all individuals on title not exceeding $150,000.00; and
• have saved a down payment amount at least equal to the loan amount for which the buyer applied.

Buyers must be preapproved for an insured high-ratio first mortgage (mortgage down payment is less than 20% of the home price). On completion of the purchase, program funds will be advanced and the loan will be secured by a second mortgage on the property’s title.

Things that First-Time Home Buyers Should Consider

• Future interests rates are unknown, when the interest free period expires will the home buyer be able to manage the mortgage and interest payments?
• How much will the homebuyer be able to borrow from a conventional lender as the payments on the HOME Program loan will be part of the calculation for how much the homebuyers qualifies for. Generally, the more debt/expenses that a home buyer has, the less they will be approved to borrow from the conventional lender.
• Typically, conventional lenders do not permit second mortgages to be registered against title to a property, although these ones will likely be approached differently.  That being said, it may make the refinancing process more complex.

It is estimated the British Columbia government will invest about $703,000,000 over the next three years to help about 42,000 potential first-time home buyers. The investment money is primarily coming from the property transfer tax revenue.

In addition to the new HOME Program there are other programs available to home buyers, such as the First-Time Home Buyers Program and the Newly Built Homes Exemption for property transfer taxes in certain circumstances.

Please do not hesitate to contact us if you are thinking about buying home. Speaking to a lawyer early in the process will set you up to successfully navigate today’s changing and exciting market and make the best use of resources available to you.

Author: Jaime M. Boyle

This information is general in nature only. You should consult a lawyer before acting on any of this information. This information should not be considered as legal advice. To learn more about your legal needs, please contact our office at (250) 448-2637 or any of our lawyers practicing in real estate law at the following: