The Finance Minister Bill Morneau has just introduced Budget for 2019. He said the government is looking to help more Canadians buy their first homes by picking up a portion of their mortgage costs and increasing the amount they can borrow from their retirement savings for a down payment.
These are the Main Features of the Budget Regarding First Time Home Buyers
1.The Buyer can qualify for CMHC’s shared-equity loan of 10% on New Homes and 5% for Re-sale homes.
2.The Loan will be payable when the Buyer sell his/her property
3.The Maximum Household income should be under $120,000 per year.
4.The Maximum loan should be no more than 4 times of the household income.
5.The Buyer can also take up to $35,000 from RRSP up from $25,000
We are still waiting for further details of these initiatives.
Now take a look at The following example adapted from the 2019 budget plan. It illustrates how this First-Time Home Buyer Incentive will work
On the left side we have Insured Mortgage Model with no incentive and on the right side, we have CMHC First-time Home Buyer Incentive Model. House Price is $400,000, Down Payment is 20,000 which is 5% percent, total Insured mortgage is $380,000
and the total monthly Carrying Cost is $1,973.
Now look at the right side the House Price is the same $400,000, Down Payment is $20,000 and, CMHC is contributing 10% which is $40,000 of Purchase Price, the Insured Mortgage is Now $340,000 and monthly Carrying cost is $1,745 which is a saving of $228 per month.
Some experts say that The Government could have done a few other things to increase the supply of housing, like changing the rules around zoning and opening up Greenbelt for more land for housing, or subsidize housing construction.