When I purchased my house a little over a year ago, I qualified for Nova Scotia Housing’s Down Payment Assistance Program, which provided me with an interest free loan of 5% of the purchase price of my house, to use as a down payment. This program was the biggest factor in enabling me to become a home owner. All my money was going towards debt repayment to improve my credit and debt service ratios, so I did not have the ability to save for a down payment at that time. Had I waited longer, I very well could have been priced out of the market, and I certainly would have missed out of the house I now live in and love.
I have written previously about qualifying for this program, and you can read all about that here. Now that a year has passed, I wanted to revisit the subject for those who may be considering it.
The down side of the Down Payment Assistance Program
The biggest challenge I see with the program currently is the price limit imposed. Outside of HRM, you can only use Housings down payment towards a house purchased for under $150,000. When the program launched in 2017, I believe that would have been sufficient to purchase a move-in ready starter home. There were plenty of charming bungalows in my area in that range and lower. But post pandemic housing boom, I’m just not sure that much inventory exists at a price point below $150,000, that would be livable without major renovations. That’s not to say that it’s impossible to find a reasonably priced home in Nova Scotia. I just fear that the budgetary restriction might take prospective home buyers much further from their desired locations than they would like.
I would like to see these limits be re-examined for 2022, to determine if it could be increased to meet the current housing market. Of course I still think it’s prudent for home buyers to purchase the least expensive home that makes sense for them, to keep their monthly expenses affordable. But what I can afford on a single income is much different than what a two income family could manage, and a slightly higher limit should be feasibly for them.
The risk of the Down Payment Assistance Program
When I closed on my home and sat down with my lawyer to sign all the paper work, I signed two mortgages. I have two loans, the DPAP loan as well as the loan from my bank for the remainder. The difference between a regular loan and a mortgage is that my home is collateral in the event that I do not make the payments I have agreed to make. It is well understood that if you do not pay your mortgage, the bank or lender can take your house. But it is very important to understand that this it also true of the housing loan.
In my case, both of these payments are quite affordable, and even in the worst of times I should have no trouble paying them. But it is a pressure hanging over me that if I were to mess up my loan payments, I could become homeless, which is harder to stomach than the risk of hurting my credit score should I fail to pay a different bill.
The ease of the Down Payment Assistance Program
The good news is that among the papers I signed was a direct withdrawal form. I actually had forgotten that, and was reminded by someone in the housing office. My first payment will come out of my account automatically on January 1, 2022, exactly 13 months after closing. The amount is only $47.50, because it is stretched over 10 years at 0% interest. There are no penalties to paying sooner, but I’ll see the 10 years out and invest for growth instead.
The only thing I don’t love about the repayment schedule is that it’s withdrawn on the 1st of the month, a day renters are used to planning for, but that’s meaningless to home owners. All of my other automatic payments happen either biweekly on pay day or on the 20th, the day child tax is paid, so days I am guaranteed to have money in my account. It will just require a tiny bit more forethought to ensure the payment always goes through.
What if I sell?
If I sell my home before the DPAP loan is fully paid back, I will have to repay the balance with the proceeds. My house has already appreciated enough that I would be able to pay realtor fees, legal fees and pay off the loan, but there would probably not be enough left over to put a down payment on another home. And because this program is for first time home buyers, I would not qualify for a second home purchase. This may mean I’m obligated to stay where I am for a while, but that is my intention anyway.
Overall it was, and still is a good fit for my financial situation and goals. I think it’s a fantastic program intended to help people get ahead in a very meaningful way. In todays troubled rental market, owning a home provides stability, flexibility and financial growth that renting can’t. The DPAP is exactly the leg up that many people need to get in to their first home, and I am thankful that it exists. I hope it will continue helping many more Nova Scotians become homeowners over the years, and adapt to changing market conditions as needed.
If you have any questions about my experience, drop a comment, and for more information check out Nova Scotia Housings website for great information.