Quote:
Originally Posted by blankall
I think maybe the "interest" he is referring to is just the increase in value of the home when it sells? No actual interest on the government portion. You'd only be paying 60% of the mortgage payment, but then have to give up 40% of the sale price when you sell?
From this reading, it sounds like the government is just finding a way for people to qualify for much higher mortgages. Without more supply, this seems like its just going to increase prices.
I'm having Deja Vu here. The article is dated a couple of days ago, but didn't we already discuss this plan?
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Here is the information on the FN plan which is used as a model for this funding program (
https://news.gov.bc.ca/releases/2024HOUS0044-001557). The 40% contribution is registered as a second mortgage with an interest rate of 1.5% compounded annually. No repayment of the contribution or interest is required monthly so the debt just ballons for potentially 25 years. A $400,000 loan ends up becoming $580,000 after 25 years which the home owner then has to refinance and start paying back to whichever lender is willing to take on that obligation.
Essentially, for a $1M purchase, the owner finances $600,000 for 25 years and pays that off and subsequently finances another $580,000 for, likely, 25 years and pays that off. I'm not entirely sure this makes financial sense but unfortunately some people may not have any other option.