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