The Liberals released the Federal Budget last week and first time home buyers are getting some help. If you have been keeping up with home prices across Canada, you know that price points for first time home buyers have been rising steadily. Here in London, the average price of a home has now risen to $400,000. So, this announcement is exciting news for those buyers entering the real estate market. Here are the nuts and bolts of the ‘First Time Home Buyer Initiative’.
- Buyers obtaining a CMHC insured mortgage can get funding by way of a shared equity program of up to 5% on a resale purchase or 10% on a new construction purchase. This will lower the borrowing costs for the buyer by sharing the cost of the purchase with CMHC.
- Example: If a buyer purchases a $450,000 home with 5% down and 5% from the CMHC initiative ($22,500), the amount of the buyer’s mortgage would be reduced from $427,500 to $405,000 thereby lowering their monthly mortgage bill and increasing affordability.
- No ongoing payments are required. The buyer would repay the incentive at time of resale. It is still unclear though if buyers would simple repay the sum loaned or if CMHC would get a share of the sale price equal to the percentage loaned (whether there is a decrease or increase in value).
- To qualify for this initiative you must have a combined income of no more than $120,000. Also, the mortgage and incentive borrowed can be no more than 4 times the buyer’s annual income. This caps the home purchase between $500,000-$600,000 depending on the down payment.
- Also announced was an increase in the eligible RRSP withdrawal amount through the First Time Home Buyer’s Plan. It was increased from $25,000 to $35,000 and must be used towards the purchase of a first home.
Not all the details have been released for the CMHC initiative and it is not expected to commence until the fall. All in all, it is some exciting news and should put a spring in the step of those newbies entering the real estate market.
Have more questions? Thinking of buying your first home? I’m here to help. Call or text me at 519-859-7792.