Past President of the Kamloops and District Real Estate Association Doren Quinton says as with any new program, there is always limitations and risks.
The program will see the federal government contribute 5% towards the fair market value of a home and you will then pay back 5% based on the market value of your home when you go to repay them. Quinton says it’s something that home buyers will need to be aware of as there is consequences that come with locking yourself into this program. He says people need to realize that we’ve seen some tremendous home price appreciation in the last decade and that could pose big issues if we saw that again. “On a $400,000 mortgage, 5% down, you’re really only saving about $100 a month on the governments interest free loan that they’re giving you. So you’re savings in the end are really only about $2700 over the life of that mortgage, and if the government comes back and takes an extra $40,000 out of your pocket, you’re not really ahead in the end game.”
The 5% loan based on the fair market value would have to be paid back within 25 years. “So lets say someone buys a $400,000 house. They love it they want to spend the rest of their life there. That home in 25 years is worth $800,000. If they got $40,000 from the government to buy that property, the government is going to be knocking on their door in 25 years for $80,000. That may be difficult to come up with unless they turn around and sell their home or refinance it.”
Quinton says that home buyers still need to have their five per cent down and need to have a certain level of income. “It also limits people if they have an annual combined income of over $120,000, they don’t qualify for this program. To buy a $300,000 home they need to make at least $71,000 a year. So there’s a bit of a sweet spot there in that middle income bracket that people can get into the home.” He believes the government will be pretty open to lending out this money to those who qualify, but he says it is still going to be a challenge for people to get in even with this new program.
