Attention first-time home buyers
Are you a first-time home buyer in B.C., or do you know someone who is? If so, you may have heard of the B.C. Home Owner Mortgage and Equity Partnership, or B.C. Home partnership for short.
The partnership started in January 2017 and will continue until March 31, 2020.
What you may not have heard 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 five per cent of the purchase price, up to $37,500.
This is an effort to assist firsttime home buyers to reach their goal of purchasing a home, while being able to save and repay this loan over the first five 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 five years, and can be repaid in full at any time without penalty. Who qualifies? You must be a Canadian citizen or permanent resident for the past five years and have lived in B.C. 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 on title must be using the house as a principal residence for five 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 first 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 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 second mortgage, which is something your first lender will have to approve.
Also, a separate lawyer will be used to prepare and register the second mortgage, which means you will be responsible for these additional legal fees.
It is important to know 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 five 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 B.C. Home partnership to ensure you meet all the eligibility criteria.
Also be in a position to repay the loan within five years in addition to your usual monthly expenses, before you start making offers on your dream home.
Courtney MacRae is a lawyer at Pihl Law in Kelowna. Reach her at lawyers@pihl.ca. Visit pihl.ca for more legal news.