The 2019 federal budget included an announcement of a new Canada Mortgage and Housing Corporation’s (CMHC) First-Time Home Buyers Incentive Plan represents a shared equity mortgage program that would give eligible first-time homebuyers the ability to lower their borrowing costs by sharing the cost of buying a home with CMHC.
The incentive would provide a funding (equity sharing) of up to five percent of the purchase price of an existing home, or 10 per cent of a newly constructed home. No ongoing monthly payments are required. The buyer would repay the incentive, for example at resale. The government has budged up to $1.25 billion over the next three years to support this program.
For example, if a borrower purchases a $400,000 resale home with five per cent down and five per cent CMHC shared equity mortgage ($20,000), the size of the borrower’s insured mortgage would be reduced from $380,000 to $360,000, helping to lower the borrower’s monthly mortgage bill. This would make it easier for Canadians to buy homes they can afford.
The program limits eligibility to households earning a maximum of $120,000 annually, and lets them borrow no more than four times their annual household income. This limits a home purchase to roughly $480,000. This Incentive Plan is not expected to begin until fall 2019. The precise details of how the program works will also be available at that time.
Also of note in the budget is a proposed increase in the eligible RRSP withdrawal amount through the Home Buyers’ Plan (HBP). Previously $25,000, this has been increased to a maximum of $35,000.
Do you have questions about these proposed programs, being a first-time home buyer, the stress test or mortgages in general? Contact the experienced Winnipeg Mortgage Brokers at One Link Mortgage today (204-928-7722) to discuss your options.
Mortgage Professionals Canada