Budget Saving first time home buyers

We are a bit disappointed (OK, a lot) with the 2019 Federal budget announcement under the Trudeau goverment- in regards to helping First Time Buyers get in the real estate market.  We don’t think they thought hard enough on this – details about shared equity mortgages are not yet available and we will share as we know more. An increase in RRSP’s available for your first purchase from $25,000 to $35,000 but you need RRSP’s to use it.  Our industry is an advocate for sound fiscal management both for individuals and government. The current financial stress test was implemented to help slow the increase in real estate values, which it has, but it is now slowing the market at the detriment to individuals trying to enter the marketplace or move-up. 

“We were looking for a cut from the current 2% stress test because interest rates have risen nearly 1% since the implementation of the stress test. A 1% cut may have been a more prudent, balanced approach.”

Brett Puckrin, AACI, P.App, PLE

 

What does it mean for North Durham and Kawartha Lakes home Buyers and Sellers? We asked one of our favourite mortgage brokers, to comment…

Last night, I chatted with Brad Vokins local Mortgage Agent in Port Perry and this is what he had to say about yesterday’s  2019 Federal budget announcement.  There were two major incentives for First Time Homebuyers

  1. The maximum withdraw from one’s RRSP has been increase from $25,000 to $35,000 for a single individual, meaning a couple can withdraw up to $70,000 in total.
  • Keep in mind that Home buyers still have to repay the money back into their RRSP over 15 years to avoid having to pay income tax on the amount withdrawn.
  • The new limit will apply to purchases made after March 19, 2019
  • This will also apply to people going through a marriage breakdown who don’t meet the usual requirement of being a first time homebuyer.
  1. The Government has also proposed a $1.25 billion funded through Canadian Mortgage and Housing Corporation (CMHC) over the next three years.   They will provide a further reduction of 5% of the cost of an existing home and 10% of the price of a new construction as an interest-free loan to be repaid when the property is sold.
  • The buyers must have their own down payment of a least 5% down but less than 20% since it has to be insured
  • Household income must be less than $120,000
  • The purchase price cannot be any more than four times the buyers’ household income.  Meaning that the max purchase price cannot exceed $480,000

For example, if the buyers’ are purchasing a $400,000 resale home.  They must have $20,000 save towards their down payment making the mortgage $380,000.  Under this program, CMHC will further reduce your mortgage by another $20,000 making the total mortgage around $360,000.  What is not clear at this point is if there will be higher insurance premiums added under this program or how this interest-free loan is actually going to be repaid.   Will CMHC share in the gains or loss when the person sells the home?  I am assuming these details will be rolled out over the new few weeks or months.    It also sounds like this will be up and running by September of this year.

Hopefully we will have more details roll out soon but time will tell

You can reach out to Brad Vokins at:

Tel: 289.385.0406

email:  bradvokins@ndlc.ca

website:  http://www.bradvokins.ca

 

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