It’s finally here! A brand-new update was released on the much-talked about First Time Home Buyers Incentive program offered by the federal government’s National Housing Strategy. This new program will be administered through the Canadian Mortgage and Housing Corporation (CHMC), and it’s designed for those struggling to find affordable housing, which as we all know, has been a challenge for many. Let’s have a look at the key facts, what they are proposing and how it will work:
Who is it for?
This program is for any first-time home buyer in Canada purchasing a home that is valued at no more than $480,000. It’s for people who have a total household income of $120,000 or less, and it will not only help them break into the housing market and reduce their monthly mortgage payments, it will also help boost new construction on affordable homes as the demand increases.
How does it work?
This incentive will offer first-time buyers an interest-free “shared equity” mortgage loan of up to 10 percent for newly built homes and 5 percent for existing houses. This would amount to up to $286 saved each month on mortgage payments. However, it’s not a standard loan that you may be familiar with. This is called a shared equity loan, meaning that the lender has a small share in the home’s value – but only for the amount of the loan (not the mortgage). In other words, when the house eventually sells, you will have to pay back either 5% or 10% of the selling price (depending on if you bought a new or previously owned home), not the loan amount you received for the purchase price. If your home increases in value as most homes do, you’ll be paying back more loan money than you received. If your home’s value decreases however, you’ll only have to pay back “the current home value at time of repayment”. It’s important to note that you would not have paid any interest on this loan, only on your mortgage amount.
Let’s imagine you bought a newly-built home for $400,000 and received $40,000 through this program. If the home sells for $460,000 in 5 years, you will owe $46,000 – not $40,000 as you initially received.
Buyers have 25 years to pay back this loan, or whenever the house sells, which ever comes first. Buyers can also feel free to pay off this loan at any time without a penalty.
When does it take effect?
It’s expected that the CMHC will start to take applications on September 2 of 2019. If the application is accepted, home buyers must have a closing date of November 1st 2019 or later. What this means is that if you are planning on buying a home with a closing date before November 1, you won’t qualify for this loan.
If you think this program is something you qualify for or you’d like to know more about it, connect with me today and we can start your mortgage application process and start preparing for this new incentive as well! To best compete in the busy housing market, you’ll want to be beat the crowds and be really ready. As an experienced, certified mortgage broker in Barrie, it’s my job to help you find the best mortgage rate as well as walk you through the process step by step. One thing I can say with certainty about government incentive programs that I’ve learned over the years is that they don’t last forever. Be sure to apply early for this home buyer incentive program and find that perfect, affordable home that you and your family deserve. Call today at 705-315-0516 and let’s get started.