BC Home Owner Equity & Mortgage (HOME) Partnership

(believed to be current to January 8th 2017)

Background:

  • Applications accepted starting January 16th 2017
  • Completion on or after February 15th 2017

Program Outline:

  • The BC HOME Partnership Loan contributes to an individual’s personal down payment, up to a maximum of 5% of the purchase price.
  • Purchase price $750,000 or less (i.e. maximum BC HOME mortgage $37,500)
  • Property must be used as principal residence for 5 years by all registered owners
  • Registered as a 2nd mortgage
    • Interest and payment free for first five years.
    • Repayable starting on 5th anniversary
      • Amortized over 20 years @ Royal Bank Prime plus 1/2 %
      • Interest rate reset on 10th, 15th and 20th anniversaries
  • BC HOME mortgage is due and payable in full upon any of the following:
    • Default on the first mortgage or the BC HOME mortgage
    • Transfer of the home or change of ownership (including addition of a person to title).
    • The property ceases to be principal residence in the first five years.

Eligibility Criteria

  • All individuals on title must qualify
  • Canadian citizen or permanent resident for at least 5 years
  • Have lived in BC for one year prior to application
  • Never owned an interest in a principal residence at any time anywhere in the world.
  • Purchase price $750,000 or less
  • Maximum funding under BC HOME mortgage is equal to amount of down payment
  • 1st mortgage must be high-ratio insured mortgage
  • Property must be owners’ principal residence for first 5 years
  • Total household income must be $150,000 or less

http://housingaction.gov.bc.ca/tile/home-owner-mortgage-and-equity-partnership/

Process:

  1. Get pre-approved from “approved” lender (does this mean that some lenders aren’t “approved”?)
  2. Apply and receive confirmation of eligibility from BC Housing
    1. Only fully completed applications with all supporting documents will be considered.
    2. BC Housing will notify by email once application has been processed
    3. Once application has been accepted BC Housing will send confirmation of pre-approval and a Home buyer’s Package outlining detailed steps to take in order to receive BC HOME mortgage
    4. Home buyer’s Package will also contain information to be given to realtor, notary public/lawyer and lender
  3. Make an offer subject to financing
    1. Send copy of Contract of Purchase and Sale to BC Housing, plus other undefined details
    2. BC Housing will provide a loan commitment letter to take to lender (not addressed is possibility that buyer may want to change lender)
  4. Take BC HOME loan commitment to “approved” lender
  5. Get final approval for an insured mortgage from your “approved” lender
  6. Remove subjects

Issues/concerns/suggestions for realtors:

  1. Longer than usual subject removal?
    1. See process above
  2. Longer than usual completion date?
    1. BC Housing’s lawyer sends instructions to buyers’ notary/lawyer
    2. Coordination of lender’s mortgage Instructions and BC Housing’s instructions
    3. Appointment setting
  3. Don’t make possession date same as completion date
    1. BC Housing’s lawyer funds buyers’ notary/lawyer after registration of 1st and 2nd mortgage
      1. How long will it take to get BC HOME mortgage funds?
  4. Don’t make completion date a Friday
    1. BC Housing’s lawyer funds buyers’ notary/lawyer after registration of 1st and 2nd mortgage
      1. How long will it take to get BC HOME mortgage funds?

Issues for buyers:

  1. Will family income increase enough in5 years to be able to afford payments on the 2nd mortgage?
    1. $25,000@3.2% (RBC Prime of 2.7% + 0.5%) = $141.17 per month in payments
  2. Will property values increase so buyer is not “underwater” when they go to sell?
a. Purchase price $500,000
b. 1st mortgage (90%) $450,000
c. CMHC Premium $10,800
d. 2nd mortgage (5%) $25.000
————-
i. Net equity $ 14,200
a. 3 months’ interest penalty ~ $3,500
b. Real estate commission ~ $21,000
————-
a. Underwater $ 10,300
~ 2%

Property needs to go up ~7% to break even; I.e.get the initial $25,000 downpayment back

  1. Will property values increase enough so owner can refinance if they default on BC Home mortgage?
    1. Change in use of the property?
    2. One of the other owners moves out:
      1. Spouses separate?
      2. Sibling strikes out on their own?
      3. Parents die?

Issues for mortgage brokers:

  1. Who is an “approved” lender?
  2. Lenders won’t be able to impose “no secondary financing” conditions (e. most/all monoline lenders)
  3. Won’t be able to change lenders; i.e. BC Housing’s approval appears to be tied to a specific lender’s pre-approval

Eligibility Criteria Comparison with other provincial programs

  1. All individuals on title must qualify
  1. Canadian citizen or permanent resident for at least 5 years
    1. First Time Home Buyers exemption requires only permanent residency
    2. FTHB exemption also allows owner to claim a refund if permanent residency is attained within 1 year of registration
    3. New Housing exemption requires only permanent residency
  1. Have lived in BC for one year prior to application
    1. First Time Home Buyers exemption also allows exemption if person has filed at least 2 income tax returns in the last 6 years in BC
    2. FTHB exemption is one year prior to completion
    3. New Housing exemption has no BC residency requirement
  2. Never owned an interest in a principal residence at any time anywhere in the world.
    1. First Time Home Buyers exemption has this requirement
    2. New Housing exemption does not have this requirement
  3. Purchase price is $750,000 or less
    1. First Time Home Buyers exemption requires purchase price to be less than $475,000 for full exemption; partial exemption allowed up to $500,000
    2. New Housing exemption requires purchase price to be less than $750,000 for full exemption; partial exemption allowed up to $800,000
  4. Maximum funding under BC HOME mortgage is equal to amount of down payment
  1. 1st mortgage must be high-ratio insured mortgage
    1. not a requirement for either exemption from the Property Transfer Tax
  2. Home must be principal residence for 5 years
    1. use as a principal residence for only 1 year is required for either exemption from the Property Transfer Tax
  1. Total household income must be $150,000 or less