HAVE YOU HEARD?
Are you a first time Home Buyer?
The Federal Government ANNOUNCED today a new program to help First Time Home Buyers!
You could have part of your down payment paid by the Government.  The government is estimating that the plan could create about 100,000 new first-time buyers over the next three years.
What is the program?
“The budget offers the program, known as the First Time Home Buyer Incentive, as a way to help with housing affordability. The government is earmarking $1.25 billion over three years for something it's calling a "shared equity mortgage."
What are the terms?
“It’s more like an almost interest-free loan — one where the repayment plan doesn't require any payback until years in the future. In order to qualify, an applicant must have a household income of less than $120,000 per year and be able to come up with a five per cent down payment — the minimum requirement for an insured mortgage with the Canada Mortgage and Housing Corporation (CMHC).”
Savings Example -
“If a first-time buyer wants to buy a home that costs $400,000, they'd have to come up with a $20,000 down payment, under both the new rules and the old ones. Normally, they'd have to take out a loan for $380,000 to cover the rest of the purchase price — but under the new program (if it's a newly constructed home), CMHC could kick in $40,000 toward the purchase price, in exchange for a 10 per cent stake in the home.”
“That brings the buyer's mortgage down to just $340,000 for the home, instead of $380,000. On a standard mortgage at 3.5 per cent interest, that translates into a monthly mortgage payment more than $200 lower than it would have been for the 25-year life of the loan. That's more than $2,700 a year in potential savings.”
What is the purchase price cap?
“The program also caps out at four times the applicant's annual income, which means it can only help home owners looking to buy properties where the mortgage value plus the CMHC loan don't exceed $480,000.”
“But if a would-be buyer meets the conditions described above, under the program the CMHC would kick in up to 10 per cent of the value of a newly built home, or five per cent of the value of a resale.”
What’s the catch?
“The catch is that the homeowner eventually has to pay back the CMHC's stake in the property — but they don't have to do that until they sell (or sooner, but only if they want to).”
“The CMHC would contribute that much to the home purchase in exchange for a corresponding equity stake in the home. That has the effect of bringing down the size of the homeowner's mortgage — but comes with a bill to be paid down the line.”
When will the program start?
“Precise details of how the program works won't come out until later in the fall, but today the government provided a rough breakdown of how it might work for a prospective buyer. If a first-time buyer wants to buy a home that costs $400,000, they'd have to come up with a $20,000 down payment, under both the new rules and the old ones.”
“The catch is that the homeowner eventually has to pay back the CMHC's stake in the property — but they don't have to do that until they sell (or sooner, but only if they want to).”
What we don’t know yet?
“The budget is far from clear on how much the buyer would owe; is it the same dollar amount the CMHC provided up front, or does the bill go up based on how much the house has appreciated in value?”

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Matt Parker
Mortgage Broker & Team Leader
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