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CMHC’s New Incentives for First-Time Home Buyers

Everything You Need to Know About CMHC’s New Incentives for First-Time Home Buyers

First Time Home Buyers

James Harrison, AMP
Mortgage Broker
Mortgages.ca

 

Breaking into the Canada mortgage market as a first-time homebuyer can be daunting, especially when it comes to navigating incentives, offers, and financial hurdles. Luckily, CMHC’s newest Home Buyer Incentive Plan for 2019 is full of incentives tailored perfectly for first-time homebuyers, the most important of which are broken down below:

 

Payment for Equity

As part of the latest First-Time Home Buyer Incentive Plan, CMHC will pay 5% of the purchase price for an existing home and up to 10% for the value of a new home as part of a down payment assistance program in exchange for an equity stake. This means that the Government of Canada partners with you in a Shared Equity Mortgage, taking a share of the increase (or decrease!) in the property’s market value. To qualify for this incentive, first-time homebuyers must meet a short set of criteria:

 

  • Minimum down payment amount based on mortgage amount
  • Qualifying income is $120,000 or below
  • Total mortgage is no greater than four times the qualifying income
  • Homes must be below the purchase price of $500,000

 

The government’s equity stake, otherwise referred to as a Shared Equity Mortgage, is then repaid as a percentage of the selling price, which takes into account the gain or loss in property value.

 

Taking Advantage of Your Money: RRSP Withdrawals

The Home Buyer’s Plan, a federal program that acts as a first-time homebuyer incentive, allows you to use a $35,000 RRSP withdrawal (in one year) towards your new home purchase. Making your RRSP withdrawal requires you to fill out a Home Buyers Plan Redemption Form to declare the amount that is being withdrawn, whether in a single amount or in installments. 

 

Why First-Time Homebuyer Incentives?

In today’s housing market, it can take individuals years to save up enough for the minimum down payment of 5% on a home. With the help of the First-Time Home Buyer down payment assistance incentive and the RRSP withdrawal allowance, purchasing a home can come much sooner. 

 

These incentives, developed for Canada’s real estate market and the first-time homebuyer, offer a number of benefits that help one transition into home ownership, such as: 

 

  • Purchase a home with the future in mind
  • Reduce the financial burden without delaying property purchase
  • Shared equity mortgage means interest-free down payment assistance
  • First-Time Home Buyer Incentive allows choices for repayment based on property value, not interest
  • Savings on mortgage payments of up to $3,430 per year

 

Your first home is one of the biggest, most important purchases of your life. The Government of Canada has developed a system to help first-time homebuyers comfortably acquire and pay back a mortgage, with assistance that is based on property value, rather than an established interest rate. With CMHC’s First-Time Home Buyer Incentive, buying your first home just got much easier.

 

Apply now for a mortgage with Mortgages.ca and learn more! 

blog, Mortgage News

5-Year Fixed Rates Drop Due to Predicted Prime Rate Cuts

What does the arrival of a dropped 5-year fixed product mean for the variable versus fixed debate? Frankly, not much.

5-year fixed products drop over anticipated prime rate cuts

Image Source: Al x

James Harrison, AMP
President / Mortgage Broker

As of this week, economists are predicting the prime rate could actually start coming down. As a result, banks and lenders have been dropping the 5-year fixed rates and removing the discounting on the variable products so as to encourage clients to go fixed.


Don’t Be Fooled: We’ve Seen This Strategy Before

The banks have been aggressively pushing the 5-year fixed rates for the past 8 months now, using the fear over the last few rate increases as reason enough to consider the switch. But lest we forget: the 5-year fixed product is the most profitable product for the banks, not you.

When the prime rate goes up, banks systematically try to convince variable clients to break their mortgage and instead lock into a new fixed rate that is generally 0.75%-1.00% higher than the current variable rate. And based on 2018’s recent Mortgage Consumer Report, this fear mongering works — noting at least 68% of Canadians are talked into a fixed rate product.

But rest assured, when our variable clients call–panicked after a prime rate increase–our answer is always the same:

Our Clients: Do we lock in?
Us: No!

An Alternative (& More Effective) Strategy

Say NO to 5-year fixed but you should increase your payments as if you did lock in! This way, you are paying off your mortgage faster without the higher interest cost and terrible terms & conditions of the bank’s 5-year fixed product.

Speak with a Mortgage Professional

Regardless, you should always work with a professional and experienced mortgage broker in making these decisions. By definition, a mortgage broker works for you, independent of the bank’s interests.

If you’re considering a switch and your bank suggests a 5 year fixed rate product, make sure to ask them “why?” Think critically and get a second opinion from a mortgage professional. It’s your hard-earned money, it should stay in your pockets.

In Summary:

  • Go variable
  • Increase your payments from day one as if you went fixed and
  • Always stay loyal to yourself first–not your bank.

Let’s Connect!

For more information, click Apply Now, email us at info@mortgages.ca, or call 647-795-8700 x 0 today for your free, no-obligation consultation.

With the help of a Mortgages.ca broker, you have nothing to lose and only great INSIGHTS to gain.