A Vancouver developer is hoping to sell condominiums with no down payment.
“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 company says on their website.
How this works is that the purchase price of the property is discounted a minimum of 8% below market value, then that 8% is recognized by the Canadian Mortgage and Housing Corporation (CMHC) as a down payment. A bank, with the approval of CMHC, covers 100% of the purchase price of the property. No second mortage or vendor take back mortgage is required.
The program is aimed toward families with lower incomes who are not financially able to afford a down payment. To qualify, potential residents must be making $65,850 a year or less for a one bedroom or one bedroom plus den, or $92,430 or less for a two bedroom. The home must also be listed as their primary residence.
After at least two years, the owners are then able to sell the home and can keep 100% of their profits as well as the Affordability Program down payment.
Down payments are traditionally needed to prove to a mortgage lender that the homeowner has some equity in case of a loan default. With smaller or no down payments, the amount of equity decreases and if they are no longer able to pay their mortgage, they lose the option of selling the house to pay back the loan, causing a loan default and foreclosure. In that case, CMHC would have to pay the difference to the lender.
CMHC has not yet approved the project.