As applicants begin to roll in to BC Housing from those looking to take advantage of the new first-time homebuyers program, one local MLA said the program could have a particular benefit to Chilliwack residents.
That’s because it only applies to homes under $750,000, a high price locally but at the low end in places such as Metro Vancouver.
“I would expect it would be easier to qualify for the program in lower-cost areas of the province like Chilliwack,” Chilliwack-Hope MLA Laurie Throness said.
Housing minister Rich Coleman officially launched the program Monday and said that within six hours, 29 applications had been submitted.
Officially called the B.C. Home Owner Mortgage and Equity Partnership program, it provides up to $37,500, or up to five per cent of the purchase price of a home, by way of a 25-year interest-free loan.
That loan is also payment free for the first five years. Applicants must qualify for an insured high-ratio mortgage to ensure they can afford payments.
Critics, such as Tom Davidoff of UBC’s Sauder School of Business called it a “terrible idea,” and a taxpayer gift to sellers in Metro Vancouver.
Davidoff said it will “add more heat” to an already overheated housing market.
Coleman responded that the critics are wrong and that the program is too small to change the market.
Throness, too, said that because the program is provincewide, the estimated 42,000 homes that the government estimates could be purchased under the program, won’t all be bought in Metro.
“I think the impact on house prices across the province will be negligible,” Throness told The Progress.
He added that it was an affordable program for taxpayers because it is a loan, not a grant.
“Because of our budget surpluses and triple-A credit rating, the B.C. government can borrow money at the very best rates. Taxpayers will only pay these lowest-possible interest rates on $703 million over three years to get at least 42,000 families into their own homes.”
He added that the program is focused on families of modest income—pegged at a combined family income of $150,000 annually—and it ensures only British Columbians have access.
To qualify, applicants have to have been a Canadian citizen or permanent resident for at least five years and have lived in B.C. for at least a year before applying.
Further to the critics, Coleman said the program was not designed to impact housing prices in Metro Vancouver but was designed to get those into the market who otherwise just couldn’t get a down payment together.
And a spin-off benefit could be some relief to the rental market as some renters are turned into homeowners.
An example of how the program could work, according to the Ministry of Housing:
- Home purchase price - $475,000
- This first-time buyer has saved $11,875 toward their down payment, or 2.5 per cent of the home's purchase price. Through the program, the Province will contribute $11,875, equal to the buyer's 2.5 per cent down payment. This brings the total down payment to $23,750, or five per cent of the home's purchase price, as required by Canada Mortgage and Housing Corporation. This loan is interest- and payment-free for the first five years.
- As a first-time buyer, this person can also qualify for the First Time Home Buyer's exemption for the Property Transfer Tax, saving: $7,500.
- The B.C. HOME Partnership program enabled this buyer to purchase their first home as this buyer did not have the minimum down payment saved to qualify for an insured first mortgage.