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Home Equity Partnership Questions

With the new Home Equity Partnership Program being announced on December 15th and being launched yesterday, many of the finer details of the program are starting to come out. The government website does not answer all questions, but does have a 1-800 hotline. I have been making daily calls as questions have come up from customers, and thought I would share some of the answers I’ve received. This information is provided for educational purposes only. Please have your clients confirm themselves any details of the program, as this is not a TDCT program.

Question: One of the applicants has previously owned a home, and one is a first time home buyer. Is there any pro-rated amount of loan available?

• No. Anyone on title must be a first time home buyer. Co-signers are OK, as long as not on title.

Question: What happens if an applicant gets a new job in 2 years and needs to move?

• Loan is fully payable if the applicant sells or moves away in the first 5 years. Exceptions may be granted on a case by case basis.

Question: Can the minimum required 2.5% down payment from the applicant be gifted?

• Yes. The minimum 2.5% can be gifted from CMHC approved sources (immediate family).

Question: So, the applicant has to debt service the new loan? Doesn’t this reduce the amount they can borrow and make the program useless?

• Yes, the client has to debt service the new loan, but the benefits of the extra down payment can outweigh the reduced debt servicing. Here is some rough calculations with approximate                         housing costs to illustrate this point:

Clients have $7,500 and make a combined $60,000: They would qualify for a mortgage of:

• Without program: $150,000, based on down payment.

• With program: $285,000. Including the $48/month loan debt service payment.

• If someone else gifted the additional $7,500 needed: $294,000.

Clients have $15,000 and make a combined $80,000. They would qualify for:

• Without program: $300,000, based on down payment.

• With program: $404,000. Including the $32/month loan debt service payment.

• If someone else gifted the additional $5,000 needed: $410,000.

To put it in perspective, for every $2,500 borrowed from the government, you are losing the debt servicing equivalent of $490 of annual household income. So, if you were to borrow the maximum amount of $37,500, this would essentially reduce the annual household income used to qualify you for a mortgage by $7,359. If you have any further questions and don’t feel like waiting on hold for answers, feel free to contact me and I will add them to my list and get back to you! Or drop on in, corner office downstairs beside the lunchroom.

 

Joe Garrison

250-826-8894

Joe.Garrison@td.com