Partnering with licensed mortgage brokerage, MSI (Mortgage Services Inc., license #12009), HOA is a FSCO-licensed Mortgage Administrator (license #12600). HOA is responsible for administering all of MSI’s mortgage affairs. HOA provides shared appreciation 2nd Mortgages to help reduce the amount required from home buyers for the down payment on their first home. This extra help saves home buyers thousands of dollars that would otherwise be required of them to obtain high-ratio mortgage insurance.
What is the HOA 2nd Mortgage?
HOA is dedicated to assisting individuals and families to purchase a new home through a Shared Appreciation 2nd Mortgage. A Shared Appreciation Mortgage is different from a conventional mortgage for two reasons:
- The HOA 2nd mortgage improves affordability as it requires no scheduled repayments of principal or interest.
- It does not bear a specific rate of interest. Instead, a Shared Appreciation Mortgage earns interest at a rate equal to the increase in the value of the home. For example, if a home with a Shared Appreciation mortgage has gone up 10% in value, then the mortgage would be discharged with the payment of the mortgage principal amount plus 10% interest. If the home decreases in value, then only the mortgage principal is repayable & interest is not charged.
- The HOA 2nd mortgage is repayable upon resale, when the unit is no longer occupied by the purchaser, or when the homeowner chooses to voluntarily repay it.
Our Criteria for Obtaining an HOA 2nd Mortgage:
We only provide mortgages to purchasers who have bought units in Options for Homes developments. To be considered for an HOA 2nd Mortgage the following criteria applies:
- purchasers must be at least 18 years old,
- be legal permanent residents of Canada
- the new home must be the principal residence of the purchaser (HOA does not provide mortgages for investor-purchasers).
- purchasers must not already own or have an ownership interest in another home.
HOA will assess each purchaser’s individual credit profile and mortgage carrying capacity. Purchasers may also need to satisfy additional qualification criteria in order to receive funding from our partners.
Where does HOA get its funding?
We have created a growing, self-sustaining and permanent revolving fund. The HOA 2nd Mortgage captures the value initially created through development and a proportionate share of the increase in value over time. This pool of assets represents “social equity” that would otherwise accrue to the developers. Instead, through our 2nd Mortgages, the equity is preserved and grows as a revolving fund which is essential to providing affordable housing in the future.
HOA, a non-profit corporation operating under a Declaration of Trust, holds this revolving fund of equity solely for the purpose of providing affordable housing in perpetuity. The growth in HOA’s assets demonstrates the importance of preserving social equity in a revolving fund dedicated to providing affordable housing. To date, HOA’s funding partners – the federal, provincial, and municipal governments – have provided over $9 million to use as down payment support for families who need more than just the basic 2nd Mortgage help.
Interest & Repayment
How is interest calculated on my HOA 2nd Mortgage? The interest rate is based on the percentage increase in the value of the home from the purchase date until the mortgage is paid off. For example, if the home went up 20% in value, then the interest rate that will be charged is 20%.
A home purchased for $500,000, sold for $600,000 with an HOA 2nd Mortgage of $50,000.
Sale price of $600,000 less the purchase price of $500,000 = $100,000 increase in value
$100,000 increase in value divided by the $500,000 purchase price = 20% interest rate
So, the interest is 20% x $50,000 HOA 2nd Mortgage = $10,000 interest payable
When must my HOA 2nd Mortgage be paid off?
HOA 2nd Mortgages must be paid off under the following circumstances:
- If the purchaser no longer owns and/or lives in the home (e.g. the home is sold, rented out after 2 years of initial purchase date, transfer of ownership to anyone else (this includes the death of the home owner) etc.); or,
- If the primary mortgage amount is refinanced so that it is larger than the original primary mortgage amount, the HOA 2nd Mortgage must be paid off.
Other circumstances may initiate repayment of the HOA 2nd Mortgage. For more information, please do not hesitate to contact us at:416-214-1363.