SURREY, B.C. – British Columbia has announced a program to get first-time homebuyers into the real-estate market by offering interest-free and payment-free loans for the first five years.
Premier Christy Clark said Thursday the government will provide a 25-year loan for a down payment to a maximum of $37,500 on funds have been matched by buyers.
The program applies to homes with a maximum value of $750,000 and the interest-free portion of the loan will last for the first five years, with the repayment schedule at current interest rates over the remaining 20 years.
“People need a partner in scraping together that first down payment,” Clark told a news conference.
“A home is a place where you live and raise your family and start your life,” she said of the three-year program that starts next month.
It will paid for in part by a 15-per-cent foreign homebuyers’ tax and a luxury tax on homes priced at over $2 million, Clark said.
New Democrat David Eby, the Opposition’s housing critic, said the plan will saddle first-time homebuyers with more debt when the government should be building affordable housing on provincial land.
Eby said the government’s move appears to reward real estate developers who are major financial contributors to B.C.’s Liberal party.
“We really think the government should be looking at protecting the interests of first-time homebuyers so they don’t have to take on so much debt to get into the housing market because they are already swimming in debt,” he said. “It’s bizarre to me they are going the other way and the only explanation I can think of is they want to reward their donors.”
To be eligible, first-time buyers must be pre-approved for an insured high-ratio mortgage for at least 80 per cent of the home’s purchase price.
The government provided an example of the loan program on a $750,000 home where the buyer has saved $52,500 for a down payment.
The minimum down payment required for an insured first mortgage is $50,000, but with the maximum $37,500 government loan, a buyer could make a total down payment of $90,000.
A B.C. Housing Ministry document estimated the program will save the homebuyer $5,201 in interest payments over the first five years of the mortgage, at an estimate of three per cent.
Clark said she does not believe providing interest-free and payment-free loans will drive up the price of homes in B.C.
“Our analysis tells us that it won’t because everybody who is going to be eligible for this program will have to have been accepted for a mortgage already,” she said.
The program is open to Canadian citizens or permanent residents of five years who have lived in B.C. for a year. Applicants must have a combined gross income of $150,000 or less.