Feds Introduce New First Time Home Buyer Plan Matching 5% Down payment for Re-Sale & 10% For New Homes
Thursday Jun 20th, 2019Share
The government’s First-Time Home Buyer Incentive will launch on September 2, 2019
Although this is a new program when it was announced in March there was a lot of missing information.
Here is the most recent update with more details. Under the plan, the government would help some first-time buyers by advancing an interest-free loan of up to five per cent of the purchase price of an existing home, and up to 10 per cent of the cost of a new home. This will allow homebuyers to take out a smaller mortgage and keep their monthly payments lower. The program will provide up top 5% matching of down payment for re-sale homes and up to 10% of a new home purchase. Buyers will have to repay the interest free loan in 25 years or whenever they sell the house. The goverment has decided toshare in the risk as well by taking a percentage of any profits but will also share a percentage of any loss in the event the market collapses. So as an example if you purchase a new home worth $300,000 and sell for $350,000, if you utilized the full 10% government loan of $30,000 you would have to pay back $35,000 (10% of the appreciated $50,000).
There are certian qualifications though. Maximum household income must be below $120,000. There is also a requirment that the maximum mortgage be no more than $480,000 inlcuding the CMHC premium.
Overall I predict that this will be a great way for first time buyers to enter the market, even with the 2% stress test still in effect and as a result we should see a boost of sales starting in September which couyld even mean a trickle up effect to larger homes. With interest rates falling the fall may be the best time for first time buyers to enter the market!