New Downpayment Assistance program for First Time Homebuyers in BC
Effective January 16, 2017 there will be a new Government Program for First time buyers.
Homebuyers will only need to save 1/2 their downpayment now!
The government will lend you the
other half of your downpayment via a second mortgage loan. One of the biggest challenges today is saving the downpayment. House prices have almost doubled in some BC areas this past few years, which means your rent keeps increasing as well and it gets tougher to save up, so many are using the "bank of Mom and Dad" or borrowing from RRSP's just to scrap together the 5% required.
There are multiple ways of taking advantage of this program; mainly reducing your downpayment initial outlay or by increasing your downpayment to reduce your insurer premiums (ie CMHC or Genworth).
At this time, it seems this government downpayment program will only qualify under the non-traditional downpayment program, also known as the Flex Down mortgage. see CMHC Purchase rules or Genworth Borrowed Downpayment Program or Canada Guaranty Flex 95 program. The other challenge is that not all banks and lending institutions have mortgage program that allow this flex down insured mortgage. This is where having a mortgage professional to assist in knowing what lenders have programs that will fit.
SAMPLE BUYER: A first time buyer of a $500,000 property would normally be required to put a 5% downpayment ($25,000) on this purchase. Now you only have to save $12,500 from your own sources, the other $12,500 will be a no payments and interest free 2nd loan for the 1st five years. From years 6-10 your payments would be $72 per month for the 2nd loan.
It gets homebuyers into the housing market TODAY, while they continue to save/pay off the 2nd loan and reap the gains of ownership and increase in equity.
Mortgages over $500k - Canada Mortgage and Housing Corporation requires a 5% down payment for the first $500,000, and 10% for the remaining portion. This means the minimum down payment required for a home valued at $600,000 is $35,000.
Some Program Points to Note:
Applications accepted as of January 16, 2017 for closing of mortgages February 15th to March 31, 2020
The 2nd loan interest rate is set at time of 1st mortgage registration and is 1/2 a percent over current first mortgage rate. ie: today 2.90% 5 year term, so your second loan would be 3.40% for years 6-10 of the loan.
The program is only available for the next 3 years
The CMHC/Genworth insurance premium is 3.85% for this program vs 3.60% for standard downpayment programs.
You must reside in the home for entire 5 years
be first-time homebuyer
Canadian Citizen or Permanent Resident for 5 years
resided in BC for one year
combined gross income of $150k or less
under $750k purchase price
No rentals or recreational homes
As with any new program, there is always hiccups and changes. Stay tuned for updates!