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Attention First Time Buyers – Want to Increase Your Net Worth?

The BC Government’s Homeowner Mortgage and Equity Partnership (HOME) program offers an opportunity for a first time buyer to achieve a significant return over the next 5 years.

 

This opportunity could apply to all first-time buyers, whether it’s you, you and your partner, your brother or your sister, your daughter or son, or your granddaughter or grandson.

 

  1. Assemble the investment: the down payment and transaction expenses. Potential sources include: Savings, RRSPs, parents, early inheritance, selling under-performing investments or non-essential “toys”.
  2. Qualify for the mortgage – our mortgage partner Lorraine Gingras of RBC can help you with all of the details of getting approved for a mortgage.
  3. Determine the level of risk you are comfortable with. The scenarios that we provide here assume a growth rate that is half of what the actual change has been over the past 5 years.

Two last points to consider when thinking about buying a home:

  1. You are paying yourself and not a landlord for the next 60 months
  2. Capital gains on your primary residence is TAX FREE so if you come out ahead, you don’t loose 30% or more to taxes.

From what we see here, the numbers speak for themselves. Call us to work out your plan.

 

Scenario 1: $425,000 Condo

Purchase Price: $425,000 • Your Down Payment: 5% = $21,250 • Closing Costs: ~$1,200
BC Property Transfer Tax: $0 for qualified 1st-time buyers, below $450,000
Your Total Investment: $22,450
BC HOME Partnership Down Payment: 5% = $21,250
Total Mortgage Amount (includes CMHC Premium): $391,680

Assuming that:

  • You qualify for the mortgage amount
  • 2.99% 5-year mortgage, 25 years amortization
  • You qualify for the HOME Program
  • Maintain the mortgage for 60 months
  • Sell in 60th month & pay back HOME loan in full, interest free
  • Property value average annual growth = 3.55%

Your potential results:

Increase in equity: $75,098.22
Percent increase in equity: 335% (67% per year)
Taxes due on amount: $0 – No Capital Gains Tax on primary residence

 

Scenario 2: $750,000 Condo

Purchase Price: $750,000 • Your Down Payment: 5% = $37,500 • Closing Costs: ~$1,200
BC Property Transfer Tax: $13,000
Your Total Investment: $51,700
BC HOME Partnership Down Payment: 5% = $37,500
Total Mortgage Amount (includes CMHC Premium): $691,200

Assuming that:

  • You qualify for the mortgage amount
  • 2.99% 5-year mortgage
  • You qualify for the HOME Program
  • Maintain the mortgage for 60 months
  • Sell in 60th month & pay back HOME loan in full, interest free
  • Property value annual average growth = 3.072% (half that of the past 5 years!)

Your potential results:

Increase in equity: $154,199.04
Percent increase in equity: 298% (60% per year)
Taxes due on amount: $0 – No Capital Gains Tax on primary residence

 

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