The province unveiled plans for new home-buyers Thursday that offers interest-free loans to first-time home buyers.
“We believe every British Columbian deserves a place to call home,” said Premier Christy Clark, in a press release. “We’ve invested in affordable rental housing, we’ve invested in transitional and emergency housing, and now we’re partnering with first-time buyers to make the purchase of their first home more affordable.”
The B.C. Home Owner Mortgage and Equity Partnership program contributes to the amount first-time homebuyers have already saved for their down payment, providing up to $37,500, or up to five per cent of the purchase price, with a 25-year loan that is interest-free and payment-free for the first five years. Through the B.C. HOME Partnership program, the province is investing about $703 million over the next three years to help an estimated 42,000 B.C. households enter the market for the first time.
The plan, however, simply adds debt to first-time home-buyers, says the NDP.
“People can’t afford housing because Christy Clark sat on her hands for two years while prices spiraled out of control,” said B.C. New Democrat housing critic David Eby. “Now, instead of taking action to fix the problem by increasing the supply of affordable housing, Christy Clark thinks that first time homebuyers should get two mortgages instead of one.”
Eby said the plan doesn’t do anything to help affordability. Instead, it puts young people who are already facing record levels of debt further into debt, while rewarding developers and speculators, “many of whom are big donors” to the B.C. Liberal party.
“During the two years that Christy Clark refused to believe that speculators were pricing families out of the housing market, the benchmark price of a detached home in Vancouver shot up by over $600,000,” said Eby. “This announcement does nothing to reverse the huge cost of her neglect.”
Under the program, during the first five years, no monthly interest or principal payments are required as long as the home remains the homebuyer’s principal residence. After the first five years, homebuyers begin making monthly payments at current interest rates. Homebuyers will repay the loan over the remaining 20 years, but may make extra payments or repay it in full at any time without penalty. The loan must be repaid in full when the home is sold or transferred to another owner.
To be eligible, buyers must be preapproved for an insured high-ratio first mortgage (mortgage down payment is less than 20 per cent of the home price). On completion of the sale, program funds will be advanced and the loan will be registered as a second mortgage on the property’s title.
Other programs are available to help first-time buyers save on property transfer tax. The First Time Home Buyers Program can save first-time buyers up to $7,500 when purchasing a home valued up to $475,000. Or, first-time buyers can access the Newly Built Homes Exemption, which can save buyers up to $13,000 in property transfer tax when purchasing a newly constructed or subdivided home worth up to $750,000.
The B.C. Home Owner Mortgage and Equity Partnership program will start accepting applications Jan. 16, 2017.