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BC to offer interest-free, payment-free loans for first-time home buyers

Last Updated Dec 15, 2016 at 3:38 pm PDT

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Summary

Will soon start providing up to five per cent of a home buyer's down payment, to a maximum of $37,500

Must be a Canadian citizen who has lived in the country for at least five years and in BC for one year

SURREY (NEWS 1130) – There is some good news if you’re a first time home buyer in this province. The provincial government says it will soon start matching up to five per cent of a home buyer’s down payment, to a maximum of $37,500, in the form of 25-year loan that will be interest and payment free for the first five years.

As an example, on a $475,000 home, you will only have to save up around $12,000 to make an offer — whereas before you would need to put $24,000 aside for your down payment.

“We believe every British Columbian deserves a place to call home,” says Premier Christy Clark. “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. I think it’s a good deal for every British Columbians.”

The BC Home Owner Mortgage and Equity Partnership program will match down payments that people have already saved. And the province says through this, it will invest about $703 million over the next three years to help about 42,000 potential first-time buyers. The investment money is coming from the property purchase tax.

At a news conference today in Surrey, Clark was asked if the province could afford all this. “I think it’s important that government is there to help people. Our economy is growing at a fast pace, we’re the fastest growing economy in the country. We can afford to make these investments.”

She adds governmental analysis shows this move won’t drive up prices in the hot real estate market.

In order to qualify for this, you must be a Canadian citizen who has lived in the country for at least five years and has lived in BC for one year. You must be pre-approved for a mortgage from an approved lender to be eligible. The program will start accepting applications from potential home buyers as of January 16th, 2017.

Clark is hopeful there is overwhelming interest in the program and she says there is no cut-off if there is. “In order to get into the house you ultimately want to live in for the rest of your life, you have to get into the market in the first place. This is part of our plan to make sure we’re putting British Columbians first.”

Is the program in everyone’s best interest?

Some critics and experts aren’t sure this move is going to good for everyone. Today, the Bank of Canada released a report that showed a high number of Canadians, many in the Vancouver-area, have a high income-to-mortgage ratio, so is that a concern? She didn’t directly answer the question. “In order to qualify for this program, people have to qualify according to the federal government’s rules that they set for mortgage. I don’t know if it will have an impact in that respect, but we should all be concerned about the levels of debt overall. In the meantime, we should also pay attention to making sure British Columbians can own a home for heaven’s sake.”

When pressed about whether this will allow people who shouldn’t necessarily be in the market get into it, Clark said she wasn’t worried. “No, because they will still have to qualify for the mortgage rules.”

BC Economist Joshua Gottlieb says, “A home-buying grant does not help people who are not close to buying.” He adds the supply of homes needs to be increased and vacancies decreased to make rents affordable. Gottlieb believes such subsidies “worsen the affordability problem and reward speculation” as well as “encouraging leverage and risk-taking” by home buyers and the provincial government.