First Time Buyers to get 10% off?!
CMHC Considers 10% incentive towards new builds for first time buyers
Last week, the Government announced their proposed budget and one provision has generated a great deal of discussion. It appears that there are plans for the Canadian Mortgage and Housing Corporation (CMHC) to contribute up to 10% of the purchase price towards a first time home buyer’s down payment on a new home. Resale homes are eligible for an incentive up to 5%.
At best, this might mean applicants can qualify for a mortgage up to 10% more than previously, depending on their income and debt load. Additionally, an applicant’s mortgage payment may be reduced by as much as $250 / mo, depending on the amount and rate of their mortgage.
Whats’s the catch?
Of course there’s a catch. This is a government program we’re talking about, not charity.
The biggest sticking point for most first time home buyers is the down payment. Despite its appearance, this program does not alleviate that obstacle. Buyers are still required to come up with the minimum 5% down payment towards the purchase price, as usual.
The program is only available to first time home buyers or those whose family situation has dissolved (divorce, separation). The buyers’ combined income must be $120k or less, and the purchase price must not exceed 4x the income plus down payment. That means there is an effective cap at around $500k purchase price.
In exchange for the incentive, CMHC will be taking an equity stake proportionate to the contribution. So if you qualify for a 10% incentive, it will cost you 10% of the equity in your home. As of yet, repayment requirements are not entirely clear so we don’t know whether recipients will be required to pay back only the initial contribution or, if the house appreciates in value before selling, 10% of the sale price.
Who is this for?
Not many people, frankly.
Beneficiaries of this program will have:
- Household income of less than $120k per year
- A budget of less than 4x household income
- 5%+ down payment saved up
While this program can ease the burden of owning a home, It will not make home ownership possible for those who are currently excluded from the market, at least not in any appreciable way.
If you think you might qualify and have more questions about the program, please don’t hesitate to reach out via the links below.
Andrew Baker is a Registered Realtor and Real Estate Investment coach with a proven track record of leveraging the Four Unfair Advantages of Real Estate for his clients. Connect with his team on Facebook and fluxrealty.ca for more investing protips and 1-on-1 consulting.
