Habitat responds to complaints by former resident about sale of house on North Road

If a homeowner wants to sell, Habitat has the right of first refusal but it returns all mortgage payments made

(By News Desk)

“After you have paid off the loan, the home is yours – free and clear.” 

That’s what page two of the Habitat for Humanity homeowners’ handbook said when Jessica (who has asked that her real name not be published) moved into the Habitat house at 742 North Road in 2008.  She took this to mean that after she paid off the mortgage, she could sell the house on the open market. However, like all families acquiring a Habitat house, she had signed an agreement giving Habitat the right of first refusal. 

“It all depends on your definition of ‘free and clear,’ Habitat for Humanity Sunshine Coast executive director Ronnalee McMahon told The Coast Clarion. “I take it to mean that you are free and clear of mortgage payments. After you pay off the mortgage, you can continue to live in the house. But we are not in the business of setting people up for their retirement. The right of first refusal is never removed from title when a family gets a Habitat home.”

A single mom with two young sons, Jessica was selected in 2004 for the first Habitat home in Gibsons. She worked as a cook at a care home and later became a care aide. With her income as a cook, she qualified for two mortgages, one in the amount of $273,627.65 for the actual cost of the house, and one in the amount of $57,856.93 for the difference between cost and market value, for a total of $331,484.58. 

The loans were interest-free and there was no down payment, but before moving in, she had to put in 500 hours of sweat equity on weekends and holidays. It took three years and the help of volunteers from the community to accomplish that. The permitting process beforehand took a year.

Families pay down an interest-free mortgage geared to their income — 30 per cent of gross family income, versus 50 per cent or higher in some cases in the regular market — and invest 500 volunteer hours with Habitat, McMahon says. “The difference between paying a mortgage geared to your income in comparison to market rates amounts to significant savings every month. For example, a family with a combined income of $40,000 per year would pay $1,000 per month for a 1,200 square foot three-bedroom home which would cost $1,800 – $2,500 in mortgage payments on the open market.”

“They say the mortgage payments are 30 per cent of your income, but that’s on your gross [income]. For me, it worked out to 47 per cent of my take-home pay,” Jessica says. “I struggled, but I owned a house, or so I thought.”

She intended to stay in the house, pass it on to her sons, rent it out or take a reverse mortgage after retirement. 

In 2017, Jessica asked Habitat if she could pay off the $187,410.37 left on the mortgages. Her partner was going to help financially. 

Habitat did not take her up on her offer. Habitat lawyer J. Wayne Rowe explained that the first mortgage could be paid off without penalty, but the second mortgage could not be prepaid without Habitat’s consent. 

Under the terms of that second mortgage, she would be forgiven 25 per cent of the balance after continuous occupation of the property for 17 years, and forgiven the full amount after 28 years. 

“I would suggest that it is not to your benefit to refinance the property even if Habitat were to permit the second mortgage to be paid out,” Rowe said in his letter. “Habitat would require that the option to purchase remain as a charge on the property in priority to any new mortgage, which in my experience would be unacceptable to any bank or new lender.”

Jessica was very disappointed. “I felt like I had been thrown under the bus. I thought the house was mine to do with what I wanted.” She moved out and went to live with her partner in January this year.

If a homeowner chooses to terminate a mortgage before it has been paid off, they are, in most cases, entitled to a return of all loan payments, minus administrative costs and/or any cost to make repairs to the home, with the exception of normal wear and tear, McMahon says. “This enables the family to move into the conventional housing market with sufficient funds for a down payment.”

Habitat gave Jessica $95,000 back in mortgage payments. So basically, she lived rent-free since 2008. “Yes, if you look at it that way: if I had rented, I would not have had $95,000 now. But if I had been the owner, I would have had a property which would have been worth a lot more in today’s market. That $95,000 is not enough for a down payment now.”

“When a family leaves, Habitat returns all their mortgage payments, regardless of what the market does at that moment,” McMahon says. “It could be the market has gone down, and you’ve paid more, but you get it all back. That’s extra insurance. As a homeowner, I’d take comfort in that: when you leave, you can get into the market. I see that as a win all around.” 

“We don’t give away homes, our mandate is to help families with dependent children,” McMahon says. “We hope they get themselves in a financial position to get into the regular market so we can use the equity in the Habitat home to help other families in need.”

Habitat is selling the property on North Road to finance the future purchase of land for a multi-unit development. 

Jessica says she was shocked and upset when she heard Habitat had put the property up for sale on the open market for $539,000. “I possibly could have bought it for another $444,000, with my partner. They should have given me that option. Of course I would not have been happy: if I bought it for $331,000, why would I have to pay $539,000? But I did not discuss market value with them because it never occurred to me that they would sell it on the open market.”