There are many hassles involved in buying a home, but one of the biggest is financing your home. Unfortunately, it’s a seller’s market right now, and with online buying options, it can be even harder than ever to buy a home because deals can be closed so quickly.
The good news is that lenders have attempted to make at least the financing aspect of purchasing a home slightly easier on the average person with shared equity mortgages.
If you’re wondering how to get a shared equity mortgage or whether it’s a good option for you, then keep reading. We’ll tell you everything you need to know about how to get a shared equity mortgage!
Before we dive into telling you how to get a shared equity mortgage, we want to explain what a shared equity mortgage is.
A shared equity mortgage is when you take out a mortgage and allow the lender to own a percentage portion of your home. Because the ownership doesn’t rest solely on you, your mortgage will be for a smaller amount.
A shared equity mortgage is similar to a joint mortgage. However, in joint mortgages the other person who jointly owns the home typically lives in the home with you.
When you’re learning how to get a shared equity mortgage, it’s worth noting that with a shared equity mortgage, even though the lender owns a percentage portion of your home and property, they don’t actually live with you.
When you sell the property, both parties get a portion of the equity, depending on the percentage of equity each party owns.
You may be reading this article about how to get a shared equity mortgage and wondering how in the world this type of financing helps anyone, especially since it means relinquishing partial ownership of your home to the lender. Allow us to clear that up.
When you’re learning about how to get a shared equity mortgage, you’ll learn that the hardest part about getting a mortgage for many people is coming up with the down payment. With a shared equity mortgage, the lender takes care of the down payment so the borrower doesn’t have to worry about it.
According to Heather Tremain, who is the CEO of Options for Homes (a provider of shared equity mortgages in the private sector): “The shared equity mortgage helps people get onto the property ladder and start building equity more quickly, by helping them with their down payment. Under a traditional mortgage, the buyer would be responsible for saving the entire down payment lump- sum on their own.”
If you’re reading our article about how to get a shared equity mortgage and wondering whether this financing option is right for you, then this section should help clear that up.
A shared equity mortgage is ideal for:
Before you learn how to get a shared equity mortgage, it’s a good idea to learn about how this type of mortgage could potentially benefit you. Here’s a look at to some of the advantages of shared equity mortgages:
When you’re learning how to get a shared equity mortgage, you need to know about the First-Time Home Buyer Incentive.
The First-Time Home Buyer Incentive is a shared equity fund of $1.25B provided by the federal government. It was set up with the intent to make it easier for first-time home buyers to purchase a home. The initiative was first introduced in 2019.
If you qualify for the First-Time Home Buyer Incentive, you can receive up to 5% of the total value of the home towards a down payment if it’s a resale home and up to 10% of the total value of the home as a down payment if it’s a new home. You’re required to come up with 5% of the down payment yourself, as well.
If you’re learning how to get a shared equity mortgage, then you’ll want to know whether you qualify for the First-Time Home Buyer Incentive.
Here are some of the requirements factored into qualification for the First-Time Home Buyer Incentive:
In May 2021, the First-Time Home Buyer Incentive was updated and expanded. This means it’s even easier for first-time home buyers to receive financing for their homes. So, it’s important for you to know about the updated requirements of the incentive while you’re learning how to get a shared equity mortgage.
The most important thing you need to know about the expansion is that it only applies to people in Vancouver, Toronto, and Victoria. If you don’t live in these areas, then the previous qualifications still apply.
Here are the new qualifications set forth in the expansion:
Part of the reason that this expansion only applies to Toronto, Vancouver and Victoria is because the expansion was designed to further assist first-time home buyers in high-cost markets in these regions. It’s because it’s a lot more difficult to buy a home for $565,000 in these areas, but at least for $722,000 you should be able to at least find a decent condo to purchase.
The expansion came after years of outcries from critics who said that the First-Time Home Buyer Incentive only benefited people who lived in low-cost markets such as Regina or Winnipeg. The expansion now means that first-time home buyers can get help with financing their homes, no matter which market they choose and that’s why you need to know about the First-Time Home Buyer Incentive when you learn how to get a shared equity mortgage.
If you’re looking for a good way to finance your home, then a shared equity mortgage may be a good option for you. Anyone in Canada who wants to learn how to get a shared equity mortgage should also learn about the First-Time Home Buyer Incentive. If nothing else, it doesn’t hurt to see if you qualify.
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Many municipalities and housing associations offer this sort of mortgage to both buyers with low- income and first- time buyers. Family members can provide shared equity mortgages too, and many private lenders are eager to offer them, as well.
Of course, you have the option to sell your home with a shared equity mortgage. But whether you make any profit from the sale is dependent on the amount of equity you own. And you’ll have to share the profit with the lender, who also owns a percentage of the home.
No. If you want to use the Incentive, then you should bring that up with the lender in advance.
To qualify for the First-Time Home Buyer Incentive, you can’t have owned a home within the past 4 years. The rule is that the four- year period starts on January 1st 4 years before the Incentive is applied, and ends 31 days before the incentive is applied.
There are often restrictions involved with selling the house that dictate how much you can sell the house for and who you can sell the house to. This is dependent on the mortgage agreement you’ve arranged.