There will soon be a new way for first-time buyers to step onto the homeownership ladder, but it’s based in London, England. If there’s success there, perhaps we’ll see this type of homebuying make its way to Canada.
The company is called Wayhome. It’s a route qualifying first-time buyers can take if they’re stuck in that position where they can afford rent or a mortgage but can’t save up a big enough down payment to buy.
Wayhome requires you to put down 5% (at least £12,500 - just over $20,000 CAD) and have a household income of at least £30,000 (just over $48,000 CAD). One of Wayhome’s investment partners buys the home in full with you, so they own 95% and you own 5%.
So, you own 5% of the home and you pay rent to your investment partner, which is determined based on the average rent in the neighbourhood, minus the percentage you own. For example, if the average rent is $1,000 a month, you’d only pay $950.
The end goal is to have you afford more of the home, so you can arrange it so that all the money you pay on a monthly basis that’s above the monthly rent goes towards buying more of your home. It’s basically a super gradual way to homeownership.
There are some catches though. Wayhome has to ensure the homes are smart investments, so you can’t just buy any home. The property has to be in a quiet, urban area, be in good condition, not be the cheapest or most expensive on the street, be freehold, ready to move in, have two to five bedrooms, and be your primary residence.
In London, you have to pay a “Stamp Duty” when you buy a home, which is like our land transfer taxes. Typically, a first-time buyer would be exempt from these taxes, but with Wayhome, you’d still have to split the Stamp Duty with your investment partner.
There are many other conditions and details about who pays for things like maintenance and insurance that a first-time buyer in London should definitely look into before deciding to buy a home through Wayhome.
As far as we know, this type of program does not exist in Ontario or Canada. The new company caught our eye because the federal government's First-Time Home Buyer Incentive just kicked in. The program gives qualifying first-time buyers the opportunity to enter a shared equity mortgage with the Canada Mortgage and Housing Corporation.
The CMHC puts upwards of 10% down on your home purchase if you qualify and have 5% to put down yourself. That’s as far as the relationship with the CMHC goes, until you sell your home and have to pay back upwards of 10% of the selling price (depends on how much the CMHC loans you).
If we’re getting into the shared equity mortgage game with the government, is it possible that something like Wayhome is the next course of action to address the Greater Toronto Area’s housing affordability crisis? Would you buy a home through Wayhome if you lived in London, England?