The Enhanced Homebuyers Program: A Closer Look
The Enhanced Homebuyers Program is a co-ownership investment model that is designed to help aspiring homeowners, or repeat home buyers, be able to afford the home they are wanting.
The program provides an opportunity for individuals facing financial obstacles when it comes to homeownership, by contributing anywhere from 5-15% of the home's purchase price towards the down payment on the home. Keep in mind that the Enhanced Homebuyers program will only co-buy on homes valued at $550,000-$2,500.000.
According to the Canada Mortgage and Housing Corporation, 5% down payment is required for purchase prices up to and including $500,000, 10% down payment for purchase prices between $500,000 and $1,000,000, and 20% down payment is required for purchase prices $1,000,000 and above. The minimum down payment is $35,000 at 5%.We at the Santa Sells Houses Team understand that the process of buying a home can be stressful and intimidating. Our team of experts are committed to helping you navigate through the home buying process as smoothly, and stress free as possible.
In our last blog post, we introduced and provided an overview of the Enhanced Homebuyers Program. We recommend reading that one first to provide background information and insight to what the program has to offer. Click here to view.
In this post, we want to provide you with specific scenarios with real life examples so you can see how this program can benefit you. It will provide clarity within the buying process. Whether you're a first time homebuyer struggling to come up with the down payment or need assistance in securing a mortgage for the home, the Enhanced Homebuyers Program can provide you with the financial support you need.
We will be taking 2 different household incomes and debt scenarios to give you a closer look at what the monthly payments would look like with a traditional mortgage versus co-buying with the Enhanced Homebuyers Program. Most First Time Homebuyers are looking to buy homes within the $500,000-$700,000 range so, these examples should give you a better understanding of the proces.
Example 1
In this scenario, you are wanting to purchase a $550,000 home without the assistance of the Enhanced Homebuyers Program, and If you were to put a 5% (For an amount over $500,000, a 10% down payment is required) down payment of the purchase price. Imagine you are a single-person household with an annual income of $90,000 ($7,500 monthly) and have monthly car payments of $400.00 a month.
Here is what the monthly breakdown would look like
Purchase Price- $550,000.00
Property Taxes- $3,500.00
Down Payment- (5.5%) $30,250.00
Mortgage Rate- 5%
Amortization Period- 25 years
Mortgage amount (4% CMHC insurance premium)- $540,540.00
Monthly Mortgage payment including CMHC insurance premium (4%)- $20,790.00
MONTHLY MORTGAGE PAYMENT: $3,144
To show the comparison, this scenario is with the assistance of the Enhanced Homebuyers Program. You are planning to put down 5% ($27,500) and the program's contribution of 15% will allow you to have a 20% down payment towards the purchase price of the home. Keep in mind, once you have 20% to put down, you avoid paying CMHC insurance.
Purchase Price- $550,000.00
Property Taxes- $3,500.00
Down Payment- (20%)- $110,00.00
Mortgage Rate- 5%
Amortization Period- 30 years
Mortgage amount (NO CMHC insurance)- $440,000.00
MONTHLY MORTGAGE PAYMENT: $2,348
The above scenario represents a reduction in the monthly payment of $796 or $9,552 per year.
You can see that the monthly payments decrease when you co-buy with the Enhanced Homebuyers Program. In the first example, you wouldn’t actually qualify for the mortgage. You would only be able to qualify for a $310,000 home with 5% down payment.
Don’t forget about closing costs. You as the co-owner living in the property will be responsible for all the closing costs when you buy and sell the home.
Land Transfer Tax- $7,473.00
First-Time Homebuyers Rebate- $4,000.00
Land Transfer Tax amount due on closing if you are a FTHB- $3,475.00
What happens when the homeowner decides to sell this home in 5 or 10 years?
5 years
We will explore how the numbers play out in our Enhanced Homebuyer Program. For this example, we are going to use a modest home value appreciation rate of 3% per year. Let’s revisit the number from when the home was purchased. Remember you contributed 5% and the program has contributed 15%, this is how the equity is divided when sharing the remaining proceeds.
Purchase Price- $550,000.00
Property Taxes- $3,500.00
Down Payment- (20%)- $110,000.00
Mortgage Rate- 5%
Amortization Period- 30 years
Mortgage amount (NO CMHC insurance)- $440,000.00
MONTHLY MORTGAGE PAYMENT: $2,348
This table represents 5 years of mortgage payments. After applying a property appreciation rate of 3% year over year for the 5 years we have a property value of $637,600 which is a value increase of $87,600.
Let’s fast forward 5 years to when you decide you’d like to sell the house. For this example, the home sells for $637,600, and during that five-year timeframe you have paid off $36,249 of the mortgage principal.
In this example, the homeowner will walk away with $85,648.
10 Years
Now that you’ve seen what it looks like after owning the home for 5 years. Let’s go even further than the first example to 10 years from the original purchase date. We have the same year over year appreciation rate of 3%. The new property value is $739,154 which is a value increase of $189,154. The following table shows 10 years of mortgage payments.
Let’s fast forward 10 years to when you decide you’d like to sell the house. For this example, the home sells for $739,154, and during that 10-year timeframe you have paid off $82,651 of the mortgage principal.
In this example after 10 years, the homeowner will walk away with $157,439.
EXAMPLE 2
In this scenario, you are wanting to purchase a $700,000 home without the assistance of the Enhanced Homebuyers Program, if you put 5 % down payment of the purchase price. You have an annual joint household income of $125,000.00 and pay $700.000 a month in car payments.
Here is what the monthly breakdown would look like:
Purchase Price- $700.000.00
Property Taxes- $4,500.00
Down Payment- (5%) $45,000.00
Mortgage Rate- 5%
Amortization Period- 25 years
Mortgage amount (4% CMHC insurance premium)- $680,680
Monthly Mortgage payment including CMHC insurance premium (4%)- $26,180.00
MONTHLY MORTGAGE PAYMENT: $3,058.97
To show the comparison, this scenario is with the assistance of the Enhanced Homebuyers Program. You are planning to put down 5% and the program's contribution of 15% will allow you to have a 20% down payment towards the purchase price of the home. Keep in mind, once you have 20% to put down, you avoid paying CMHC insurance.
Purchase Price- $700,000.00
Property Taxes- $4,500.00
Down Payment- (20%)- $140,000.00
Mortgage Rate- 5%
Amortization Period- 30 years
Mortgage amount (NO CMHC insurance)- $560,000.00
MONTHLY MORTGAGE PAYMENT: $2,988.67
The above scenario represents a reduction in the monthly payment of $970.20 or $11,642.40 per year by going with the Enhanced Homebuyers Program.
You can see that the monthly payments decrease when you co-buy with the Enhanced Homebuyers Program. In the first example, you wouldn’t actually qualify for the mortgage. You would only be able to qualify for a $500,000.00 home with 5% down payment without the contribution of the program.
Don’t forget about closing costs.
Land Transfer Tax- $10,475.00
First Time Homebuyers Rebate- $4,000.00
Amount due on closing- $6,475.00
What happens when the homeowner decides to sell this home in 5 or 10 years?
5 years
This table represents 5 years of mortgage payments. After applying a property appreciation rate of 3% year over year for the 5 years we have a property value of $893,397 which is a value increase of $193,397.
Let’s fast forward 5 years to when you decide you’d like to sell the house. For this example, the home sells for $893,397 and during that five-year timeframe you have paid off $46,134 of the mortgage principal.
In this example, the homeowner will walk away with $129,283.
10 Years
Now that you’ve seen what it looks like after owning the home for 5 years. Let’s go even further than the first example to 10 years from the original purchase date. We have the same year over year appreciation rate of 3%. The following table shows 10 years of mortgage payments.
Let’s fast forward 10 years to when you decide you’d like to sell the house. For this example, the home sells for $571,165, and during that 10-year timeframe you have paid off $63,866 of the mortgage principal. The new property value is $571,165 which is a value increase of $146,165.
In this example after 10 years, the homeowner will walk away with $250,247.
Overall. The Enhanced Homebuyers Program is an excellent option for those looking to get into the market sooner and help those secure a mortgage for the home of their dreams. With the assistance of the program, owning a home is not only in reach but closer than you think.
You may still have questions and we are here to help. Our team at Santa Sells Houses is here to guide you every step of the way and ensure you have a smooth, enjoyable home buying experience. Contact us today for more information or fill out our assessment form here to determine your situation.
Keep on the lookout for our blog posts to come as we dive deeper into this topic.
Previous blog post here.
