Habitat for Humanity shortens interest-free mortgage years in face of housing costs
Families will now have interest-free mortgages for 15 years, instead of lifetime
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Housing market inflation has resulted in one long-time organization changing the way it finances homes for those less fortunate.
Habitat for Humanity – an international organization with a chapter in Manitoba – works to help low income earners afford home ownership.
One of the ways it does so is by offering families interest-free mortgages until a house is sold or paid off.
“That policy was crafted 25 years when houses cost 50,000 to 60,000, and even the lowest income families could pay them off without difficulty in 20 years,” CEO Sandy Hopkins said in a recent interview.
“Well now the houses are five times that expensive … but unfortunately, family incomes have not increased by that same five-fold, so the amortization period had extended out to 50, 60, even 70 years. And that’s just not sustainable.”
That’s why last year, Hopkins said the policy was changed so that families who apply for a home would be instead offered a 15-year interest-free mortgage, and be expected to obtain a regular mortgage in year 16.
It is a policy that will continue into this year, he said.
“If they were diligent in making their payments every month and every year, that after 15 years they had more equity in the house than they was debt,” he said.
“They would have no difficulty obtaining a conventional mortgage.”
Hopkins said the change does not affect those families with previous housing agreements with the organization, and has no impact on the qualification process. .
Staff wrestled with the policy change for upwards of a year, he said, costing out several alternatives, but settled on a shorter interest-free mortgage as the best solution.
“For new families coming in it’s still a heck of a deal. You’re able to purchase a home, a brand new energy-efficient home for no money down, no interest on a mortgage for 15 years and payments geared for your ability to pay rather than the value of the property.”