Posted by: Courtney MacRae | Posted on: April 21, 2017
Are you a first-time home buyer in BC or do you know someone that is? If so, you may have heard of the BC Home Owner Mortgage and Equity Partnership – or the BC HOME Partnership for short, which started in January 2017 and will continue until March 31, 2020. What you may not have heard about is how this program could work for you and what criteria you need to meet to qualify.
The program is meant to help contribute to your personal down payment by providing repayable funds in the amount of 5% of the purchase price, up to $37,500. This is an effort to assist first-time home buyers to reach their goal of purchasing a home, while being able to save and repay this loan over the first 5 years of being a homeowner.
How does this loan work?
A 25-year loan is registered as a second mortgage against the title to your property. The loan is interest-free and payment-free for the first 5 years, and can be repaid in full at any time without penalty.
You must be a Canadian citizen or permanent resident for the past 5 years, and have lived in BC for the last 12 months. The purchase price of the home must be $750,000 or less. You cannot have owned an interest in a principal residence anywhere in the world, or received a first-time homebuyer exemption. All individuals that will be on title must be using the house as a principal residence for 5 years, and their combined gross income must be $150,000 or less. Prior to applying for the loan, you will also need to have saved half of the minimum down payment required and be pre-approved for a high-ratio 1st mortgage from a National Housing Act approved lender.
What else do you need to know?
Ideally once you have saved for your portion of the down payment and are pre-approved for a mortgage, you should apply for this loan before making any offers on properties. If you are relying on this loan, be aware that quick closings won’t likely be an option. You will need to allow at least 14 days to receive final approval of the loan. On closing the loan is registered as a 2nd mortgage, which is something your 1st lender will have to approve. Also, a separate lawyer will be used to prepare and register this 2nd mortgage, which means you will be responsible for these additional legal fees. It is important to know that while this a 25-year loan, principle and interest payments will be payable at the current rates over the remaining 20 years if after the first 5 years you are unable to payout this loan. If and when you sell, move, or add anyone to the title, the loan must be paid out in full.
Buying a home is an exciting milestone and there are options meant to assist you with obtaining the funds required. Be prepared – in order to take advantage of the BC HOME Partnership ensure you meet all the eligibility criteria and that you are in a position to repay the loan within 5 years in addition to your usual monthly expenses, before you start making offers on your dream home.
The information provided above is for educational purposes only. This information is not intended to replace the advice of a lawyer or address specific situations. Your personal situation should be discussed with a lawyer. If you have any questions or concerns, contact a legal professional.