On March 19, the Federal Government announced the official 2019 budget.  One major topic on the discussion table (and one we were all holding our breath for) was the discussion of affordable housing in Canada.  So just what happened on “Budget Day”?  Here are the highlights of the 2019 Budget:

CMHC First Time Home Buyers Incentive Plan

-This would give first time home buyers the ability to share the cost of buying a home with CMHC
-For existing homes – the incentive would provide up to 5% (funding/equity sharing) of the PURCHASE PRICE
-For newly constructed homes the incentive would provide up to 10% (funding/equity sharing) of the PURCHASE PRICE
-Funding/Equity sharing means that CMHC would cover a percentage of the purchase price.

We are awaiting clear details of how repayment would take place.

Example:

• 400K purchase price, 5% down payment (20K), AND 5% CHMC shared equity mortgage (20K), the size of the insured mortgage would be reduced from 380K down to 360K, which would lower the monthly payment amount for the first time home buyer

To qualify for the program:

• 120K max household income
• Cannot borrow more than 4x their annual household income – making max purchase price approx. 505K
• 100k household income would mean max 400K mortgage in order to use this program.

Also, mortgage applicants under this plan still have to qualify under the federal stress test, which ensures that borrowers will be able to keep up with the payments even if interest rates rise by roughly two full percentage. The incentive, however, would lower the bar for test takers, as applicants would have to qualify for a lower mortgage.

The predicted start time is Fall 2019 for these guidelines.

Home Buyers Plan RRSP Increase

An increase of the previous $25,000 for RRSP withdrawal amount through the Home Buyers Plan to $35,000

These were the two mortgage related key changes that came out of the Federal Budget.

by Geoff Lee