Hey guys, Jacob here. In today’s blog we’re going to be talking about the new proposed changes that CMHC announced last week. Please keep in mind that I am not a mortgage representative or a mortgage specialist. I don’t deal with financing side of things when we help our clients buy homes. I’ve got a team of professionals that I highly trust that I refer all of my clients to because they deal with this stuff day in and day out. If you’ve ever got any questions about financing never hesitate to reach out and I’d be more than happy to connect you to the right people.
Now that I’ve said that, let’s jump right into it. There were a few proposed changes, but two of them really jumped out at me. The first one being the home buyer RRSP withdrawal plan. They want to increase the limits from $25,000 to $35,000. That actually brings it up to $70,000 per couple that could take advantage of this plan. I think it is a great idea and I have absolutely no qualms about this one.
The one that kind of raised some eyebrows was their down payment lending program. CMHC came out and said they are going to allocate 1.25 billion dollars over the next three years, about 400 million a year, to help people buy a house that normally wouldn’t be able to afford it. The way they are going to do this is by actually lending you the down payment. To be eligible you’ve got to come up with your own 5% down payment and in addition to that your household income cannot exceed $120,000. If you do qualify for this they are willing to give you 5% of a down payment if you’re buying a resale home and 10% if you’re buying a new build home. The maximum amount they are willing to give you for a loan as well as a mortgage is $480,000 or four times your household income, whichever is higher.
I initially had some hesitations about this plan, I didn’t really understand it. I was curious as to why they didn’t loosen up the stress test or actually allow 30 year or 35 year amortizations when it comes to people’s mortgages. After reading into this I’ve realized that they’re not trying to make things affordable across the board, they’re aiming for a specific group of buyers in Canada. This is not going to help buyers in Toronto, Vancouver, Montreal, or any of the major markets. This is actually going to help buyers in areas where the purchase price is under $600,000, which coincidentally enough is right in Durham Region’s wheelhouse, particularly Oshawa and Clarington.
I do have a few questions and concerns about these programs. Number one is that there’s still a lot of information that we’re still waiting to hear. Is this going to be an interest-free loan or is it going to be a shared equity plan? Because there is a huge difference. If it’s an interest-free loan and let’s say you bought a $400,000 house and they lent you $40,000 for a down payment, you’re going to pay them back that $40,000 when you sell and that’s it. If it’s a shared equity plan and your property is now worth $500,000 when you decide to sell, are you going to be owing them $50,000 now because they “own” 10%? There are a few things I am still waiting to get clarification on.
I am also not a fan of the sharp cut off. Somebody making $125,000 a year is not going to be able to reap the benefits of the program, yet somebody who’s making $115,000 will and it gives them an unfair advantage when they’re looking at buying.
I am also not a huge fan of the government getting involved and actually putting down payments down. I think they should just make things a little bit easier for people to purchase if they’re looking to stimulate the economy, but if you’re a buyer who has a household income of $120,000 and you’re looking for some help for a down payment this program is going to be able to help you out.
When it comes to feedback, I’ve read that a TD economist said that this going to help increase values from 2-5%, but a Royal Bank economist said this is actually a “solution looking for a problem.” Everyone’s got an opinion on this, but I think it is going to help obviously a few people kind of get themselves into the real estate game and get their foot in the door with real estate and homeownership.
That’s it for today’s blog, a quick overview of what the changes were. What do you think, are you a fan of this, do you think you will be able to utilize this? Let me know down below.
If you’ve ever got any questions about the real estate market, please never hesitate to contact us. We offer a free home buyer package for everybody out there. If you’re planning on buying a home in the next 12 months we highly recommend that you read this. It is something that will break down the home buying process step by step.
We’ve also got a first-time home buyer seminar taking place next week in Oshawa. Space is limited, we’re almost full, but we’ve got a few more spots left. If you’re interested contact me and I will be more than happy to put you on the list. Visit the event page here.