Ottawa is promising to make it more affordable for first-time homeowners to fulfill their dream of owning property while at the same time increasing supply.
The $1.2-billion CMHC First-Time Home Buyer Incentive is designed to help approximately 100,000 first-time home buyers over the next three years to reduce their monthly payments.
Under the plan, first-time buyers with a combined household income of $120,000 or less will get federal help on a mortgage up to four times their income.
This means the most expensive homes Canadians would be able to buy this way would be worth around $500,000 ($480,000 max in insured mortgage and incentive, plus the down payment amount).
Jean-Yves Duclos, Minister of Families, Children and Social Development, was in Vancouver to highlight aspects of the federal budget aimed at helping the middle class.
WATCH: Minister of Families, Children and Social Development Jean-Yves Duclos talks about the housing measures included in the federal budget
“Middle class first-time home buyers will now be able to access up to 10 per cent of their home cost from the federal government,” Duclos said.
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“That will mean a shorter mortgage and/or smaller payments for their mortgages and smaller risk as well for owning a first-time home.”
For example, say you’re hoping to buy a $400,000 home with the minimum required five per cent down payment, which works out to $20,000. With the new incentive, you could receive up to $40,000 through the CMHC. Now, instead of taking out a $380,000 mortgage, you’d need to borrow only $340,000. This would lower your monthly mortgage bill from over $1,970 to less than $1,750.
WATCH: Federal Budget 2019: Incentives for first-time home buyers, skills training
The incentive would be 10 per cent for buyers purchasing a newly built home and 5 per cent for existing homes. Only households with an annual income under $120,000 would be able to participate in the program.
First-time home buyers will also be able to increase the withdrawal limit on their registered retirement savings plan from $25,000 to $35,000 through the Home Buyers’ Plan.
Duclos said the program is targeting first-time home buyers.
“It’s for those families that would normally not be able to afford a $1-million home and want to enter the housing market with a reasonably priced home,” he said.
However, the $480,000 max in insured mortgage and incentive is far below Metro Vancouver real estate benchmarks of $1.44 million for a detached home and $789,000 for a townhouse.
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“I don’t even think you can get a studio for $480,000,” mortgage broker Sherlock Yam said, who went on to say the program “will help some, but in the Metro Vancouver area it’s not as helpful as the federal government would like it to be.”
Duclos said the government will also focus on boosting Vancouver’s tough rental market.
An additional $10 billion over nine years in financing will be available through the Rental Construction Financing Initiative. It will help build a total of 42,500 new units across the country.
— With files from Erica Alini and John Hua
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