First Time Home Buyers Incentive Programme

A new CMHC (Canada Mortgage and Housing Corporation) program designed to make it easier to buy a home would be limited to first-time buyers who earn less than $120,000 a year.

On Monday September 2nd the government released details of a programme announced during the last federal budget, an initiative that could see Canada’s housing agency contribute up to 10 per cent of the price of a buyer’s first home if certain conditions are met.

Under the fine print for the First Time Home Buyer Incentive program, which was announced in March, a first-time homebuyer who earns less than $120,000 can qualify. The Canada Mortgage and Housing Corporation would kick in up to 10 per cent of the purchase price of the home, providing the borrower comes up with the minimum amount for an insured mortgage, which is now at five per cent.

There’s also a requirement that the total value of the mortgage plus the CMHC’s portion doesn’t eclipse $480,000. A government official says that effectively means the program is only available for properties worth a maximum of about $565,000, regardless of whether or not they have met the other requirements.

If that bar is met, the CMHC may kick in an additional five per cent of the purchase price of a resale home. For a newly built home, the CMHC may contribute up to 10 per cent.

The stakes from the CMHC would be interest free, meaning no ongoing cost to pay down, like a mortgage does.

But the government says in exchange for its stake, the CMHC would get to participate “in the upside and downside of the change in the property value” — which means they would be entitled to any corresponding increase in the value of a home when the buyer eventually sells. On the flip side, the government would also on the hook for any share of the loss if the property depreciates.

But the First-Time Home Buyer Incentive may not be the panacea for potential new entrants into Canada’s housing market that Justin Trudeau and his ministers hope.

Critics say that it will not make a widespread difference to the ability of first-time home buyers to afford to follow their home ownership dreams.

With the program’s requirements for household earnings of a maximum $120,000 and a mortgage-to-income ratio capped at 4 times household income, the top-end of the homes that the scheme will help to buy is far short of the $826K average home price in Vancouver or $982K in Toronto.

“It’s a very narrowly-focused program,” Royal LePage President Phil Soper told Bloomberg. “It’s just not a big enough slot of the market to move it.”

CMHC, which is administering the program, estimates that it could help 100,000 first-time home buyers but Mortgage Professionals Canada thinks the figure could be as low as 5,000 as potential buyers are dissuaded by giving up equity in their new home and mortgage insurance requirements.

“The government says it wants to make home ownership more affordable and accessible, but its actions say otherwise,” MPC chief economist Will Dunning told Bloomberg. “The proposals “to improve access are likely to have only small positive effects.

CMHC, which is administering the program, estimates that it could help 100,000 first-time home buyers but Mortgage Professionals Canada thinks the figure could be as low as 5,000 as potential buyers are dissuaded by giving up equity in their new home and mortgage insurance requirements.
“The government says it wants to make home ownership more affordable and accessible, but its actions say otherwise,” MPC chief economist Will Dunning opined in a recent statement. “The proposals to improve access are likely to have only small positive effects”.

As always ‘Caveat Emptor’

If you would like more information or to see if you qualify, please contact Terry Lynch:
416-315-1787