Is the BC HOME Partnership Program Right For You?

The BC HOME Partnership Program was created for first time home buyers who have good credit and good income but do not meet the requirements for a minimum 5 percent down payment.  With at least 2.5% down payment the BC Home Partnership Program will allow you to purchase your home sooner than waiting to save the full 5% minimum down payment.

As a home buyer you can take full advantage of the program by paying back the loan amount within the first 5 years during the interest free period.  Between the 6-10 year time frame the interest rate is preset to 3.2% (current Prime rate of 2.7% plus .5%).

First step —get a pre-approval from your Dominion Lending Centres mortgage broker.

If you meet the eligibility requirements and have 2.5% for a down payment is the BC HOME Partnership Program right for you? 

The answer is “Yes”. Here’s why.

For example, consider a purchase price of $400,000 with total 5% down of $20,000.

The 2.5% loan portion from the BC HOME Partnership Program is interest and payment free for the first 5 years.  Then in year 6 payments based on 3.2% and 20 year amortization would be payable at $56 per month. In year 11-15 the rate would be reset based on the Prime lending rate plus .5% at the time.

For those home buyers with at least 5% down payment of their own funds is the BC HOME Partnership Program right for you?

The answer is “Yes”. Here’s Why.

For example, consider a purchase price of $400,000 with total 5% down of $20,000 and no money from the BC HOME Partnership Program.

The difference in using 5% of your own money versus 2.5% of your own money and 5% from the BC HOME Partnership Program will cost you $950 more in the mortgage insurance premium (rolled into your mortgage) and $2 per month more for your mortgage payment.

If you prefer to keep some of your down payment funds and take advantage of the BC HOME Partnership Program, after 5 years if you have not paid off the BC HOME Partnership loan you would have that additional payment of $56 per month. The overall cost of the mortgage and loan payments over the life of the mortgage would result in $1,080 more in interest by taking advantage of the program instead of using all of your own funds for down payment.

Note – the rates used for the first mortgage and the loan for down payment have been kept the same for this example for comparison only.  Rates are subject to change at the end of each term.

For those home buyers with 10% down payment of their own funds is the BC HOME Partnership Program right for you?

The answer is “Yes”. Here’s Why.

Consider a purchase price of $400,000 with total 10% down of $40,000 (5% from own resources and 5% from the BC Home Partnership Program).

The difference in using 5% of your own money and 5% from the BC Home Buyer Program versus 10% of your own money is $720 less in the insurance premium (as you have a larger down payment) and $148 per month less for your mortgage payment.  After 5 years if you have not paid off the BC HOME Partnership loan you would have that additional payment of $112 per month.  If you continue with the loan throughout the life of the mortgage the net overall savings in interest is $5,000.

The BC HOME Partnership Program provides a cost effective options for first-time home-buyers.

Your down payment portion can come from savings including RRSP or gifted money from a family member.

Note – the rates used for the first mortgage and the loan for down payment have been kept the same for this example for comparison only.  Rates are subject to change at the end of each term.

These are only an example of the options for you as a first-time buyer and subject to income, credit and residency qualification. 

To ensure you are clear about the opportunity for your specific situation contact your mortgage broker.

For full details on the program visit the BC HOME Partnership Program website: https://www.bchousing.org/housing-assistance/bc-home-partnership

Blog written by Pauline Tonkin

Pauline is part of DLC Innovative Mortgage Solutions based in Coquitlam, BC.

2016 Property Assessments vs. Market Value

SHORT VERSION:

Do not rely on your provincial assessment for a fair market value of your property.

The value printed on that document was arrived at during a time in the previous year, the market may have changed a bit since then, and not in the direction you might think.

Do not rely entirely on the buyer’s opinion or the seller’s opinion in an unlisted private transaction for a fair market value.

Do not rely entirely on your neighbours, friends, or family members opinions for a fair market value of a property.

Do consider ordering a marketing appraisal, but do not rely on it 100%… maybe 98% though.

Do consider an evaluation by an experienced, active, local Realtor or two. This in combination with a marketing appraisal is the best indicator of current fair market value.

Gather professional opinions from Realtor(s) and an Appraiser – these are the people with their feet on the ground and their heads in the game.

Thank you.

LONG VERSION:

Provincial Property Assessment notices have arrived in the mail for BC residents (and other provinces), giving some homeowners a big smile and a bit more spring in their step (increased property taxes aside), while others wilt and lament at a modest gain or decrease in assessed value.

Hold on a sec, neither this assessment document nor either parties’ emotions, are tied to a current true market value. In fact provincial property assessments can be significantly too high or too low. In BC, values are determined in July of the previous year, and properties are rarely visited in person by provincial appraisers.

For this reason provincial property assessments should never be solely relied upon as any sort of relevant indicator of true market value for the purposes of purchase, sale, or financing.

Think of the assessed value instead as something akin to a weather forecast, spanning far larger and more diverse areas than the unique ecosystem that is your neighbourhood, your specific street, or your specific property. A weather forecast made the previous July, not the previous week. As this is when assessed values are locked in, a full six months prior to the notices being mailed out.

The BC Assessment Authority does offer some useful tools for a high-level view of the market. Go to http://evaluebc.bcassessment.ca/ and start typing an address. You’ll get a drop-down window where you can click on the address you want. Here’s what you can find out:

DETAILS ON ONE ADDRESS

These come up on the first screen and include: current and last year’s assessed value; size and rooms; legal description; sales history, and further details if property is a manufactured home or multifamily building. There’s also an interactive map as well as links to information on neighbouring properties and sample comparative sold properties.

NEIGHBOURING PROPERTIES

Here you can compare the assessed value of houses in the immediate neighbourhood. Clicking on any property brings up further details.

SAMPLE SOLD PROPERTIES

Find comparable properties and see what they sold for and how their sold price compares to their assessed value. This is a great research tool for owners, sellers and buyers.

These tools can be a starting point, but if you’re looking to set a selling price on your own property, always enlist a professional. Valuing your own property is not a do-it-yourself project. In a buying/selling transaction your are best to order an appraisal, which is a much more accurate reflection of current market value. It is timely and reflects value for zoning, renovations and/or other features unique to the property. An appraiser is an educated, licensed, and heavily regulated third party offering an unbiased valuation of the property in question.

WHAT’S MY HOME REALLY WORTH?

Usually, market value is determined by what a buyer is willing to pay for a home, and what the seller is willing to accept.

A quick survey of recent sales and their relation to assessed values will often demonstrate no clear relationship between sale price and assessed value. It’s often all over the map. Some properties selling well below assessment, and others well above.

You also want an experienced and local Realtor to help you determine the selling price of your home. A (busy &  local) Realtor will have a far better handle on what is happening in your area for prices than does a government document, and in many instances will save you from yourself.

In theory a comprehensive current market review completed by a Realtor should not differ radically from the value determined by a professional appraiser.

Professional appraisers spend all day every day appraising properties, and their reports are often seen as less biased. Imagine your reaction, as a buyer, to the following statements…

1. The seller says their house is worth $500,000.
2. The sellers’ Realtor says it’s worth $500,000.
3. This house is listed at $500,000 based on a professional (marketing) appraisal.

Most buyers would consider #3 the most reliable of the above statements. And most buyers requiring financing will have the benefit of the lender ordering their own independent appraisal to confirm fair market value. Sellers rarely order an appraisal in advance, which can create some interesting situations.

In practice, Realtors are relied upon for listing price estimates. Most buyers don’t care much about what anybody else thinks the house is worth. Buyers care what they think it is worth. This is why we say that market value is ultimately determined by what a buyer is willing to pay for the home, aligned with what is acceptable to the seller.

It is important to note that there are two kinds of professional appraisals. There is the marketing appraisal, such as one ordered by a seller. And there is the financing appraisal, which is done so the bank is satisfied the house is worth what the buyer and seller have agreed it’s worth. The financing appraisal is a less in depth review and is essentially answering the question; is this property worth the agreed upon purchase/sale price.

A marketing appraisal goes deeper (and costs more) but a lender is not concerned with the actual market value over and above the purchase/sale price. A lender just wants the simple question answered. It is a rare day that the appraisal for financing has a value that differs significantly, if it all, from the sale price. Therefore one should not be surprised if, when buying a home, they find that the appraisal comes in bang on at the purchase price. As they do 99% of the time.

The 1% of the time that the value is off it is almost always a private transaction where the seller has had no professional guidance at all and has inadvertently set their price below market by relying on something as inaccurate as their BC Assessment document.

IN SUMMATION

Do not rely on your property assessment for a fair market value of your property.

The value printed on that document was arrived at during a point of time during the previous year, the market may have changed a bit since then, and not in the direction you might think.

Do not rely entirely on the buyer’s opinion or the seller’s opinion in an unlisted private transaction for a fair market value.

Do not rely entirely on your neighbours, friends, or family members opinions for a fair market value of a property.

Do consider ordering a marketing appraisal, but do not rely on it 100%… maybe 98% though.

Do consider an evaluation by an experienced, active, local Realtor or two. This in combination with a marketing appraisal is the best indicator of current fair market value.

Gather professional opinions from Realtor(s) and an Appraiser – these are the people with their feet on the ground and their heads in the game.

…and of course, when it comes time for your mortgage, visit a mortgage professional at Dominion Lending Centres!

Blog is written by Dustan Woodhouse

Dominion Lending Centres – Accredited Mortgage Professional

Dustan is part of DLC Canadian Mortgage Experts based in Coquitlam, BC.

Summary of the New Mortgage Market

There have been a lot of changes in the mortgage market over the past few months so many Canadian’s plans regarding homeownership may have shifted quite a bit from last year.

First, new qualification rules came to pass in October where even though actual contract rates are sitting at about 2.79% all Canadians have to now qualify at the Bank of Canada Benchmark rate of 4.64% to prove payments can still be met when rates go up in the future. That has taken about 20% of people’s purchase power out of the equation.

The second round of rules were implemented at the end of November with the government requiring banks to carry more of the cost or lending having to do with how they utilize mortgage insurance and the level of capital they have to have on reserve. This means it is more costly for banks to lend so they are passing some of that cost to Canadians.

We now have a tiered rate pricing system based on whether you are “insurable” and meet new insurer requirement to qualify at 4.64% with a maximum 25-year amortization (CMHC, Genworth, Canada Guaranty are the 3 insurers in Canada) or are “uninsurable” where you may have more than 20% down but can’t qualify at the Benchmark rate or need an amortization longer than 25-years to qualify or are self-employed so can’t meet traditional income qualification requirements. Canadians who are uninsurable will be charged a premium to their rate of anywhere from 15-40bps. So your rate would go from 2.79% to 2.94% at the very least.

Then in BC there was the announcement of the BC HOME Partnership Program (BCHPP) in January. We have finally had some clarification on how this works but the benefits are not as grand as the BC Government would like them to appear.

The BCHPP is a tool to assist First Time Homebuyers supplement their down payment by the government matching what they have saved up to 5% of the purchase price. While this may help some clients bring more money to the table we have to factor a payment on that “loan” into the debt-servicing mix so they will actually qualify for less by way of a mortgage. They have more down payment but can not get as high a mortgage so it’s very close to a wash.

Lastly, as of mid January, CMHC announced they are increasing mortgage insurance premiums on March 17th. Genworth and Canada Guaranty are likely to follow. The insurance premiums are based on a percentage of the mortgage amount requested and how much you have to put down. For people with 5% down the premium will go from 3.60% to 4.00% and if you want to take advantage of the BCHPP program the premium will go from 3.85% up to 4.5%

What does this all mean? Overall it is more costly and more confusing to get a mortgage today than we have seen in many years. With the complexity of the new mortgage market, now more than ever buyers need someone with extensive knowledge to help them sort through their options – such as your local Dominion Lending Centres mortgage professional.

If we can be of assistance to you or someone you know, please do not hesitate to contact us.

Dominion Lending Centres – Accredited Mortgage Professional
Kristin is part of DLC National based in Port Coquitlam, BC.