Questions by potential first-time home buyers

My initial reply that started this bit was to this comment.

 

Generally, people do not go into foreclosure if they have significant equity.  It's not an issue.

 

But if analysts are right and markets like Vancouver and Victoria are overpriced then the second mortgage the Province is carrying could be worthless in the event of a correction of any size. If that happens then the taxpayers will be left holding the bag on the loan.

Maybe the second loan is cmhc insured.

But if analysts are right and markets like Vancouver and Victoria are overpriced then the second mortgage the Province is carrying could be worthless in the event of a correction of any size. If that happens then the taxpayers will be left holding the bag on the loan.

 

Probably.  I never said this was a good idea.

Maybe the second loan is cmhc insured.

 

Article said it would be a standard second mortgage.

Article said it would be a standard second mortgage.

Lenders can insure mortgages through cmhc and it's still a "standard mortgage", premium is paid by the lender.

Edited by victoriassecret, 16 December 2016 - 08:18 AM.

But if analysts are right and markets like Vancouver and Victoria are overpriced then the second mortgage the Province is carrying could be worthless in the event of a correction of any size. If that happens then the taxpayers will be left holding the bag on the loan.

The taxpayer will certainly be holding the bag for all the administration costs and costs to chase down those that won't pay it back.

Maybe the second loan is cmhc insured.

 

Sure, but CMHC is only a good idea if there's only the odd default here and there; if there was a large correction, and a mass default, CMHC might well end up in trouble - and I'm sure that we taxpayers will backstop it..

Here you go:  "Operating costs are estimated at $130 million over three years"

 

So we are all holding the bag for an extra $130,000,000 in bureaucracy.   Hooray.   By the way that is 18% of the anticipated loan volume.  Wonder if any bank lends so inefficiently?

This is a strange policy indeed, but fabulous news for us. We already have a binding contract with an agreed upon price, but won’t close until March. We now either have a bunch of free money for 5 years, or we can keep an additional $37k in the bank to invest for 5 years, and use the income earned on that principal to help pay off this BC Gov loan.  

 

Thank you BC taxpayers for the extra strength does of socialism and wealth redistribution!

This is a strange policy indeed, but fabulous news for us. We already have a binding contract with an agreed upon price, but won’t close until March. We now either have a bunch of free money for 5 years, or we can keep an additional $37k in the bank to invest for 5 years, and use the income earned on that principal to help pay off this BC Gov loan.  

 

Thank you BC taxpayers for the extra strength does of socialism and wealth redistribution!

 

You're welcome, I guess.  

This is a strange policy indeed, but fabulous news for us. We already have a binding contract with an agreed upon price, but won’t close until March. We now either have a bunch of free money for 5 years, or we can keep an additional $37k in the bank to invest for 5 years, and use the income earned on that principal to help pay off this BC Gov loan.  

 

Thank you BC taxpayers for the extra strength does of socialism and wealth redistribution!

 

Are you sure it will apply to you?   Seems like you need approval before making the offer, I doubt they will just give you money after you already have an accepted contract.

 

How to apply

Step 1: Get preapproval for an insured first mortgage from your financial lending institution.
Step 2: Apply to BC Housing for the Home Owner Mortgage and Equity (HOME) partnership loan. If you are eligible, you will receive confirmation of eligibility and Homebuyer’s Kit which includes information for your Lender, Real Estate Agent, and Lawyer/Notary Public.
Step 3: Find your home and provide the details of your planned purchase to BC Housing for approval.

Applications for the program will be accepted starting Jan. 16, 2017, for purchases that will close on or after Feb. 15, 2017

 

So it says for purchases closing after 15th, but you would be doing Step 2 after Step 3.

Edited by LeoVictoria, 16 December 2016 - 10:52 AM.

...Thank you BC taxpayers for the extra strength does of socialism and wealth redistribution!

It certainly does seem an odd move for the BC Liberals, so one has to wonder how long the program will really continue after the May 2017 election.

Here you go:  "Operating costs are estimated at $130 million over three years"

 

So we are all holding the bag for an extra $130,000,000 in bureaucracy.   Hooray.   By the way that is 18% of the anticipated loan volume.  Wonder if any bank lends so inefficiently?

Those aren't just the bureaucracy costs, it is also the loss of income that money would normally make.

The loans are CMHC insured.

I don't understand why this program is only available to those needing a high-ratio mortgage.  Basically, the government is saying "ha ha sucker," to all those first-time buyers that have saved up 20% and are buying within their means.  Makes no sense.

 

Should be available to all first-time buyers.  Argument will be that those with 50% down might be getting help from parents and my counter argument is those with 10% down might be getting help from parents as well.

I don't understand why this program is only available to those needing a high-ratio mortgage. Basically, the government is saying "ha ha sucker," to all those first-time buyers that have saved up 20% and are buying within their means. Makes no sense.

Should be available to all first-time buyers. Argument will be that those with 50% down might be getting help from parents and my counter argument is those with 10% down might be getting help from parents as well.

The mortgage does not need to be high ratio in the end. The requirement is that you have a pre-approval for a mortgage at maximum 80% LTV at the insured (4.64% 25 year amortization qualifying rates).

Similar to when we purchased at Promontory in order to only have to put 10% down for the deposit, we needed to be pre-approved for 90% LTV CMHC approved based on the purchase price.

I believe that the government created this program to already help those who are able to help themselves. The first time buyers would have to qualify at the higher rates which in turn would protect the investment that the province is making with all of our tax dollars.

The mortgage does not need to be high ratio in the end. The requirement is that you have a pre-approval for a mortgage at maximum 80% LTV at the insured (4.64% 25 year amortization qualifying rates).

Similar to when we purchased at Promontory in order to only have to put 10% down for the deposit, we needed to be pre-approved for 90% LTV CMHC approved based on the purchase price.

I believe that the government created this program to already help those who are able to help themselves. The first time buyers would have to qualify at the higher rates which in turn would protect the investment that the province is making with all of our tax dollars.

 

Okay good to know. Is it true that the 5% from the government cannot be used to lower CHMC fees? For example, if you have 10% down plus 5% from government you are still paying the CMHC premium as if you only had 10% down?

Okay good to know. Is it true that the 5% from the government cannot be used to lower CHMC fees? For example, if you have 10% down plus 5% from government you are still paying the CMHC premium as if you only had 10% down?

You would think that the 5% from the government would be considered non-traditional downpayment (see definition below). From the CMHC table there are only additional premiums for less than 10% total would non-traditional downpayment (3.85% premium).

I believe it will all come down to whether or not the 5% from the government is required to be insured as well through a mortgage loan insurance provider. If it is protected against default as well (just like the first mortgage) than I could see it not lowering the overall mortgage loan insurance premium.

https://www.cmhc-sch.../moloin_005.cfm

** Down Payment Requirements — Traditional sources of down payment include: Applicant’s savings, RRSP withdrawal, funds borrowed against proven assets, sweat equity (<50% of min. required equity), land unencumbered, proceeds from sale of another property, non-repayable gift from immediate relative, equity grant (non-repayable grant from federal, provincial or municipal agency). Non-traditional sources of down payment include: Any source that is arm’s length to and not tied to the purchase or sale of the property, such as borrowed funds, gifts and 100% sweat equity.

Received some new information directly from CMHC.

From what I take from it, the only way to avoid mortgage loan insurance in their entirety is to put a minimum of 20% down.
Putting less than 5% down (3.85% mortgage loan insurance) anything more than 5% down and you just follow the normal tables (B.C loan program only saves you the interest for the 5 years until you have to start repaying the balance.)

For the purpose of calculating debt service ratios, the loan provided to the borrower under the B.C. Program must be included in the Total Debt Service (TDS) ratio calculation and the monthly payment must be based on using the higher of the contract interest rate or benchmark rate, and with a twenty year amortization of the B.C. loan amount. If the contract rate in the Conditional Loan Approval (CLA) letter from the B.C. Program is not yet known for the second mortgage, then use the benchmark rate for that loan to include repayment in TDS based on amortization of 20 years. However, Lenders may need to resubmit their application for insurance, should the contract rate (based on a copy of the CLA from borrower) ultimately state a higher interest rate.

My take is that the B.C loan amount is not insured. Which is good for us federally (bad for us provincial).

Marko,

 

My wife and I are planning to buy in a couple of years. I was wondering how much is the average strata fee say for a new townhome in Langford. I noticed you are selling a townhome complex on Strandlund. So for instance how much of a strata fee would be for this?

 

https://www.realtor....Columbia-V9B3G2

 

Aaron

It certainly does seem an odd move for the BC Liberals, so one has to wonder how long the program will really continue after the May 2017 election.

Its an election bribe. If the Liberals were that keen on helping the average home buyer, they would have done this years ago. Also I have heard that a first time home buyer would have two mortgages to pay off, the loan and the actual house payment.