New 5% BC Government Grant and What it Means
In December the BC Liberals dabbled again in the real estate market with effects yet to be seen. With real estate being out of reach for most first time buyers the government will now lend money to buyers if they meet the following criteria.
- Maximum loan of $37,500, or five per cent of the home’s purchase price.
- The buyer must be able to match the loan amount they are applying for.
- Have been a Canadian citizen or permanent resident for at least five years.
- Have lived in B.C. for at least one year prior to the purchase.
- Be a first-time buyer who has not owned an interest in any residential property anywhere in the world at any time.
- The home must have a purchase price of less than $750,000.
- The buyer must already be able to qualify for an insured high-ratio first mortgage for at least 80% of the purchase price.
- Must have a combined income of $150,000 or less for everyone going on title.
The loan will be registered as a second mortgage and will be interest free for the first five years. After the five year mark, the buyer has 20 years to repay the loan which will be set at a rate of prime plus 0.5%. For someone that utilized the full $37,500 that would equate to about an extra $200 a month in payments. The loan can be repaid in full at any time without any penalties. It's definitely affordable and a great way for people to enter a market that they couldn't before. Developers and Realtors alike are excited about this new program too. And that's just the problem...
It is estimated that the new loan program will allow 42,000 new buyers to make their first purchase. The big question that arises is "how will this affect the real estate market?" With the market having cooled after the big boom we saw in the Spring of 2016 is it a good idea to introduce 42,000 addition buyers into what is arguably already the most competitive price range. It wouldn't surprise me if adding that many new buyers would cause a 5% increase in prices in that price range essentially eating away the equity portion of the loan.
For a list of other grants and programs available see http://www.rebgv.org/cost-saving-programs-homeproperty-buyers-and-owners",
Author: Ped Naimi
Date Published: December 22, 2016
Vantage Real Estate