THE CMHC FIRST-TIME HOMEBUYER INCENTIVE
What is The CMHC First-Time Homebuyer Incentive?
It is a $1.25 billion fund administered by the Canadian Mortgage and Housing Corporation (CMHC) over three years will provide 5% of the cost of an existing home and 10% of the price of a new home through what amounts to an interest-free loan to be repaid when the property is sold.
The money would go to first-time home buyers applying for insured mortgages.
The key stipulations & points are:
– Users must have a downpayment of at least 5%, but less than 20%;
– Household income must be less than $120,000
– The purchase price cannot be more than four times the buyers’ household
income.
– The government will own the percentage of increase in equity when you sell
or refinance.
– The loan is repayable at anytime
For example, say you’re hoping to buy a $400,000 home with the minimum
required 5% down payment, which works out to be $20,000. With the new
incentive, you could receive up to $40,000 (for a new home) through the
CMHC.
Now, instead of taking out a $380,000 mortgage, you’d need to borrow only
$340,000. This would lower your monthly mortgage bill from over $1,970 to
less than $1,750.
Homeowners would eventually have to repay this mortgage at re-sale or
refinance CMHC will share in any capital gain (or loss)– receiving 5% or
10% of the sale price (not the purchase price).
These stipulations effectively limit purchases under this plan to
properties to maximum of $533,246.00 with a 10% incentive and $564,705.00 with a 5% incentive. ($480,000 maximum in insured mortgage and incentive, plus the downpayment),
Under this plan you will still have to qualify under the federal stress
test.
You can find your first home here:
https://austintowne.com/mls-search/
Take a look below for further examples and a link to a video where I talk about my opinion!
Example 1:
Anita wants to buy a new home for $400,000 and has saved the minimum
required down payment of $20,000 (5% of the purchase price).
Under the First-Time Home Buyer Incentive, Anita can apply to receive
$40,000 in a shared equity mortgage (10% of the cost of a new home) through
the program.
This lowers the amount Anita needs to borrow and reduces the monthly
expenses.
As a result, Anita’s mortgage is $228 less a month or $2,736 a year.
Ten years later, Anita sells the home for $420,000. The Incentive will need
to be repaid as a percentage of the home’s current value.
This would result in Anita repaying 10%, or $42,000 at the time of selling
the house.
Example 2:
John has an annual qualifying income of $83,125.
To be eligible for Canada’s First-Time Home Buyer Incentive, John can
purchase condominium unit up to $350,000. John has the required minimum
down payment of 5% of the purchase price, $17,500 from savings.
John can receive $35,000 in a shared equity mortgage – 10% of a newly
constructed home.
This would reduce John’s mortgage payments by $200 a month or $2,401 a
year.
Years later, John has decided to sell the condominium unit, but it is now
worth $320,000. When the condominium unit is sold at the price of $320,000,
John will have to repay the incentive as a percentage of the home’s current
value. This would result in John repaying 10%, or $32,000 at the time of
selling the house.
My Opinion:
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