What Does it Mean for You?
The new Federal budget certainly grabbed the attention of many Canadians. Unfortunately, the announcement turned into a cliff-hanger, as we have to wait for the next episode to find out what is really going to be delivered.
The budget contains two key components aimed at addressing affordability and making it easier for first-time buyers to get approved for a home.
1. The first is just an expansion of the current “Home Buyer’s Plan” that allows the use of your RSP’s as a down payment. The maximum amount of the RSP withdrawal was bumped from $25,000 to $35,000 – but the 15-year repayment period was unchanged.
2. The second component is much more complicated, as some important details were unanswered. The “First Time Home Buyer Incentive” amounts to an interest-free loan from Canada Mortgage and Housing Corporation, however there are several conditions involved. It will allow CMHC to take an equity stake in your mortgage and the money would have to be paid back to CMHC when the property is sold, or sooner if the owner choses.
The cliff-hanger is;
How much money will have to be paid back to CMHC? Does the homeowner pay back the entire amount borrowed, or, will CMHC take a share of the increased property value? What, if the property value decreases? Will CMHC share in that loss or will the owner be liable for the full amount of the original mortgage? The answers are supposed to come this fall.
Several economists point out that neither program actually makes housing more affordable. They merely add to the options of taking on more debt that is required to be paid back. Certain calculations suggest that the FTHBI might even decrease the maximum amount a homebuyer would qualify for.
Mortgage Professionals Canada is lobbying to policymakers for a change, here are a few items of interest:
1. That the government reverse the stress test from the Bank of Canada’s posted rate and instead set it at 0.75% above the contract rate.
2. That the Government implement an exception to the rule for current mortgage holders who have met their obligations of a minimum of 5 years of their original amortization period, and wish to switch to a different lender at renewal time.
3. That qualified first-time homebuyers be provided access to amortization periods up to 30 years for insured mortgages.
These are just a few recommendations from our professional organization. If you’re frustrated with the government’s rule changes and how they affect your ability to purchase or refinance your home or negotiate a competitive rate at renewal, consider using a mortgage broker. We work for you, not the banks. We lobby the government on behalf of all consumers on what is best for the general public. The value of an Edmonton mortgage broker is far beyond “what’s my rate?”