First time buyer downpayment by Mortgage Broker Niki Cuthbert
Over the last couple of months we have seen considerable government intervention in the mortgage world. The BC provincial government has recently introduced a down payment assistance program with the goal of helping first time home buyers get into the housing market, while the federal government has increased insurance premiums in order to help protect the economy (well that’s what they are telling us anyway).
The following is what you need to know about the changes, and how they will impact you!
New First Time HomeBuyer Government Downpayment Loan Explained.
In December of 2016, the Government of British Columbia announced that it was taking bold action on housing and that they had created a program to help first time home buyers get into the housing market.
The program offers an interest free loan of up to $37,500 for Canadians who are buying their first home in British Columbia.
Applications for the downpayment assistance loan are currently being accepted by lenders, providing the eligible purchase has a completion date on or after February 15th, 2017. Here is a quick breakdown of the program:
● This is not free government money. It is a loan, and will have to be paid back.
● You must be a first time home buyer.
● You must be a Canadian citizen who has lived in BC for the last 12 months.
● The property must be located in British Columbia.
● The government will match half of the down payment, which means you have to come up with half from your own resources (or a gift from family).
● The maximum loan amount will be $37,500.
● Maximum property purchase price is $750,000.
● Your household income cannot exceed $150,000.
● You must occupy the property as your primary residence.
● Once the home is sold, or no longer being occupied as a primary residence, the loan is due in full.
● The loan is interest free for the first 5 years, and then the balance begins to amortize over 20 years.
● The loan will be registered against your property as a second mortgage.
As far as lenders and insurers are concerned, this loan is borrowed money and requires that you qualify with stricter guidelines, you can find the full qualifying details here. There will be an increased insurance premium in order to access this program compared to coming up with your downpayment from traditional sources.
Here are a few examples of how the program will work, from the BC Housing website.
If you are looking to buy your first home, this program might just be able to help you out! To find out more information about the program, please visit the BC Housing website for details, and then contact me if you have any questions!
CMHC Increases Mortgage Premiums (Again)
The Canadian Mortgage and Housing Corporation (CMHC) just announced that they will be increasing mortgage insurance premiums on March 17th 2017. They were quick to outline that the changes would only amount to roughly a $5 increase per month for borrowers. Which was the same line they delivered when they last increased premiums in June of 2015.
The bottom line here is that mortgage financing just got a little more expensive for new borrowers, moreso for conventional borrowers. Existing mortgage holders are not impacted by these changes.
“We do not expect the higher premiums to have a significant impact on the ability of Canadians to buy a home,” said Steven Mennill, CMHC’s senior vice-president of insurance Steven Mennill. “Overall, the changes will preserve competition in the mortgage loan insurance industry and contribute to financial stability.”
Here is a chart that outlines the new premiums.
It’s interesting to note that although these insurance premium increases aren’t going to significantly impact the borrower who is financing 95% of their property, they will however impact conventional borrowers (20% downpayment or more).
As unfair as it sounds, borrowers who have a 20% downpayment are now paying slightly more interest than borrowers who have only a 5% downpayment saved. The insurance premium has always been part of the conventional transaction, it was simply paid by the lender as a cost of doing business. Well, as their cost has now increased, lenders are passing this cost on by increasing the interest rate they charge on mortgages.
On the bright side, rates are still under 3%, and now is a great time to buy or renegotiate your mortgage. If you have any questions about your personal situation and how these changes might impact you, please don’t hesitate to contact my mortgage broker Niki Cuthbert anytime! [email protected]
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