Mortgage Broker, Ray Macklem, joins Adam to discuss the BC Government’s recently revealed Home Partnership program coming January 2017. The brothers also reflect on the year it was in real estate and some of their favourite episode highlights.
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Question from Sabrina (first time home buyer)
What is the new homebuyer loan policy?
It’s a 25 year loan that is interest free for the first five years. It will cover a max of $37,500. So if you have a down payment of $37,500, the BC government will match you with a $37,500 loan. Similarly, if you have a down payment of $15,000, they will match you with a loan of $15,000.
What is the criteria to be eligible?
You need to have saved a down payment amount equal to the loan amount.
You must be a Canadian citizen or Permanent Resident for at least five years and a BC resident for a least one year. You must be a first time home buyer – you cannot have owned anywhere in the world at anytime. You cannot have a combined gross household income of more than $150,000.
You cannot spend more than $750,000 on the property. And you must be able to qualify for an insured high ratio first mortgage for at least 80% of the purchase price.
More on the policy:
It’s a three year program that is expected to help 42,000 BC residents. However, it has been met with lots of criticism. Many are saying it’s just a political move leading up to the election. Others are saying the policy doesn’t actually tackle the issue of affordability. And, the policy may have long term consequences if people are unable to pay their loans back after five years.
But it is helping first time home buyers get into the market. The Foreign Buyers Tax helped to cool the high end of the market but didn’t do anything for the lower end of the market, where first time home buyers usually are.
Interview with Ray Macklem
What’s happening in lending?
Things have definitely tightened up, especially with the government intervention in October. It’s become more difficult for people to finalize their financing. And it’s becoming harder to approve cases that are outside of the box.
Advice for purchasers:
#1: Get your pre-approval done and ensure it’s a pre-approval where your documents are actually getting looked at and approved. #2: Put subject to financing into your offer. There is a lot of uncertainty working its way through the system right now. This is the adjustment period until we reach our new normal.
Rates in the new year:
We’re seeing an upward pressure on interest rates. The government intervention meant an increased cost to lenders which then gets passed onto buyers as increased interest rates. While I don’t have a crystal ball, I don’t see a substantial increase coming in the near future.
What are your thoughts on the new home buyer policy?
I’m pro. I’m a fan of any help for first time home buyers. Overall, I do think it’s a good measure. It’s helpful for some but it’s not perfect.
How will the policy be treated on applications?
I’m not aware of any consultation with the industry before the government implemented this policy. So we don’t know what it will look like from a lender or insurer standpoint. Many lenders don’t allow for a second lender to be registered behind them, especially in a high ratio insurance situation, which is what this policy would be.
Thoughts on the critique that this could result in future defaulting on mortgage payments:
Personally, I don’t see the risk. The statistics for defaulting on mortgages in Canada is very low. Less than half a percent of Canadians miss their mortgage payments. Buyers will still need to qualify at benchmark rates (higher than current mortgage rates) which is the insurance policy.
Will this policy significantly affect the housing market?
I don’t think it will have a significant impact on pricing. But it will help individuals who need help pulling together a down payment to pull the trigger. So it will help, but just a smaller segment of the market.
To get in touch with Ray, contact him at 778-968-5278 or firstname.lastname@example.org