Home Owner Mortgage and Equity (HOME) Partnership
by Orla O’Malley
The discussion around the lack of affordable homes in the Vancouver real estate market is all too familiar and in an effort to mitigate the affordability crisis, the B.C. government released the B.C. HOME Partnership loan program on December 15th. Through the program, the Province is helping first-time home buyers by contributing to the amount they have already saved for a down payment with a loan that is interest-free and payment-free for the first five years.
The loan will meet the buyer’s contribution up to 5% of the home’s purchase price, to a maximum purchase price of $750,000 and be registered on title to the property as a second mortgage on the closing date of the purchase of the home. After five years, buyers can either repay their loan in full or enter into monthly payments at current interest rates. In the latter situation, interest will start accruing at the beginning of the sixth year and the homeowner must begin making principal and interest payments, amortized over the remaining 20 years.
Additionally, the loan is due and payable in full if any of the following occurs:
- Default on the first mortgage or the BC HOME Partnership loan.
- Transfer of the home or change or ownership (including addition of a person to title)
- the home is no longer the purchaser’s principal residence in the first five years.
The program will start accepting applications January 16, 2017 for purchases that will close on or after February 15, 2017 until March 31, 2020.
Who is eligible?
Eligibility for the program requires that all individuals with a registered interest on title must:
- reside in the home;
- 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 residence anywhere in the world at any time;
- use the property as their principal residence for the first five years;
- purchase a home that has a purchase price of $750,000 or less (excluding taxes and fees);
- obtain a high-ratio 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; and
- have saved a down payment amount of at least equal to the loan amount for which the buyer applied.
How does one apply?
The first step is to get a preapproval for an insured first mortgage (insured by CMHC, Genworth or Canada Guaranty) from a financial lending institution. The next step is to apply online to BC Housing for the HOME partnership loan. If eligible, the buyer will receive confirmation of eligibility and Homebuyer’s Package containing a pre-approval letter, detailed program information and buyer’s checklist and information to provide to their lender, real estate licensee and lawyer/notary. The buyer must advise the primary lender that they have received conditional approval for a BC HOME Partnership Loan to ensure the lender will agree to the secondary financing. Finally, the buyer will need to find the home they want to purchase (under $750,000) and provide the details of the planned purchase to BC Housing for approval.