A local developer is creating an innovative program to offer condos in its newest project with a zero per cent down payment.
Townline Homes, which is currently building a Port Moody condo project called The Strand, says that the program is aimed toward individuals and families with lower incomes who are not able to afford a down payment.
Townline’s website reads, “With the ever increasing financial challenges for the average British Columbian to access home ownership in a central, amenity rich, transit oriented, and family safe neighbourhood; Townline Homes has innovatively partnered with BC Housing, Canada Mortgage and Housing Corporation and TL Housing Solutions to offer a first of its kind AFFORDABLE HOME OWNERSHIP and 0% DOWN PAYMENT program.”
The intention of the program is that the purchase price of the home is at least eight per cent below the appraised market value, a margin Townline hopes will be accepted by the Canadian Mortgage and Housing Corporation (CMHC) as a down payment. The buyer’s mortgage lender, with the approval of CMHC, covers 100 per cent of the purchase price of the property.
After two years, the new owner is allowed to sell the home and keep all of the profits as well as the “down payment” – a scheme that relies on the market continuing to grow.
Buyers who do have some additional capital to put down on the home can also take advantage of the offer, as the purchase price will still be discounted at eight per cent below market value. Any additional down payment from the buyer simply serves to reduce their mortgage.
Applicants must earn no more than $65,850 a year to qualify for a one-bedroom or one-bedroom-plus-den, or no more than $92,430 for a two-bedroom home. The home must also be as their primary residence, so the condos cannot be used for investment purposes.
Townline said it has already received provisional approval with BC Housing and told REW.ca that it is finalizing the details with the Canada Mortgage and Housing Corporation. The company that it will be making an official announcement as soon as the details are ironed out.
As of January 14, CMHC told CBC Newsthat Townline’s proposal is still under consideration, and some experts have raised concerns about the level of risk CMHC would carry under the scheme, at a time when it is attempting to reduce risk.
UBC Sauder School of Business associate professor Thomas Davidoff told CBC he has concerns about the risk if market values fall.
"CMHC normally requires some sort of down payment from the buyer because they want to know if the property value falls, the buyer will still have some equity and not default on the loan," said Davidoff.
"Otherwise CMHC has to pay the difference to the lender upon a default... If there is a large price decline CMHC is in a first loss position."
