Category Archives: female home buyers

First-Time Home-buyer Lessons

 

My husband and I bought our first home three years ago, and I’ll admit we made some mistakes along the way.

Here are 5 hard lessons we learned as first-time homebuyers.

1. We bought a very old house. Before we bought the home, we had it inspected by a reputable home inspector. In his report, he suggested that we have the house’s foundation assessed by an engineer. But we didn’t do that. Why? We were in too much of a rush to buy the house.

Lesson? Pay attention to the inspection report. After living in the home for about a year and a half, I called an engineer who told us a foundation wall had to be replaced–and soon. It wasn’t cheap.

2. Our agent told us that upping our offer by a few thousand dollars would only mean an extra $40, $50 or $60 a month on our mortgage. It doesn’t sound like much, but if interest rates go up spending thousands more on our home will hurt.

Lesson? Once you figure out your maximum price, stick to it. This is one thing we actually did well. In the end our offer was accepted at the price we were willing to pay, but upping our bid could’ve made paying the mortgage a lot tougher.

3. When you’ve been a renter for most of your life, it’s a shock to suddenly find yourself responsible for repairs. We hired a roofer who did a really bad job, and we had to pay another roofer to do the work a second time. Then I had to go to small claims court to try getting my money back from the first one.

Lesson? Shop around before hiring a contractor. I should have paid more attention to a couple of negative online reviews. You can also look up court decisions online to see if other customers have had problems.

4. We were able to put a 20% down payment on our home and had about $10,000 set aside for closing costs, taxes, home insurance and other expenses. It wasn’t enough.

Lesson? Set money aside, then set some more aside. You also need to budget for the unexpected. In the first year, we spent several hundred dollars on a new sump pump after our crawl space flooded. Last year, we spent a few hundred dollars on an exterminator for mice.

5. This past winter, while our foundation wall was being dug up and replaced, I called a real estate agent to talk about possibly putting our house up for sale. I was pretty fed up with the seemingly unending problems and stress. The good news was that our home had gone up in value and we could make a profit. Though we’ll stay put for now, at least we have an exit plan–as long as the housing market stays strong.

Lesson? Have an exit plan. Hopefully these hard-earned lessons can help you become homeowners. Or maybe decide to remain renters. Good luck!

 

Source: Tangerine.ca – by Dominique Jarry Shore Wednesday, July 3rd, 2019

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12 home inspection issues buyers can leverage to negotiate the sale price

Photo: James Bombales

Waiving a home inspection is like purchasing a used car on Craigslist without taking a look under the hood — you’re likely to run into issues down the road. A new survey from the online home improvement marketplace, Porch, reveals that 86 percent of home inspections uncover one or more problems that need to be addressed. While hiring a home inspector will set you back about $377 on average, their expertise could save you from buying a lemon or shelling out thousands of dollars in future repairs.

Prospective homebuyers can use the information provided by a home inspector to negotiate a lower sales price, accounting for the cost of repairs or replacing a feature altogether. Of the 1,000 individuals surveyed by Porch who hired a home inspector, 37 percent submitted a revised offer with help from their real estate agent, saving an average of $14,000 off the listing price of their new home. That’s no small chunk of change!

Here we examine the most-flagged home inspection issues buyers can use to negotiate the best sale price.

Photo: James Bombales

1. Roof – flagged in 19.7% of reports

Roofs with asphalt or cedar shingles have an average lifespan of 20 years whereas metal roofs only need to be replaced every 50 to 75 years. Your home inspector will look for signs of water damage, mold or algae, and take note of any sagging or missing shingles.

2. Electrical – flagged in 18.7% of reports

If you’re looking to purchase a home built prior to the 1950s, you’ll want to inquire about its electrical wiring. Knob-and-tube wiring, which was popular from the 1880s to the 1940s, can cause electrical shocks and fire. Other issues to take note of include exposed wiring, ungrounded wire receptacles and paint on electrical outlets.

Photo: James Bombales

3. Windows – flagged in 18.4% of reports

While broken windows are a pretty obvious spot, your home inspector may conduct a simple test to check for air leaks. However, there’s no guarantee the home owners will agree to repair the window seals — some consider this cosmetic, rather than structural.

4. Gutters – flagged in 16.9% of reports

Your home inspector will want to make sure the gutters are in good working condition, assessing their size, any damage, and how far water is directed away from the house.

Photo: James Bombales

5. Plumbing – flagged in 13.6% of reports

Plumbing problems can quickly add up, costing an unsuspecting homeowner thousands of dollars. With a flashlight in hand, your home inspector will scan for potential leaks, polybutylene piping, DIY projects gone wrong, tree root damage, and more.

6. Branches overhanging roof – flagged in 13.3% of reports

Having an old-growth tree in your front yard might seem like a selling point, but it can actually cause a lot of damage if not properly maintained. Branches can rip off roof shingles, leaves can pile up and clog up your gutters, and heavy limbs can come crashing down into your living room.

Photo: James Bombales

7. Fencing – flagged in 12.6% of reports

Home inspectors will evaluate the condition of a fence that lines the property. But again, this is one of those “choose your battles” situations. Are you willing to risk losing out on your dream home because a few pickets have gone missing? Probably not.

8. Water heater – flagged in 12.2% of reports

While a rickety fence may be no big deal, a busted up water heater certainly is. Home inspectors check for things like water leaks, sediment buildup, corrosion on the pipes, and low water pressure.

Photo: James Bombales

9. Driveways, sidewalks, patios, entrance landing – flagged in 11.9% of reports

Cracks in your driveway or patio are pretty much inevitable. That being said, you’ll want the home inspector to ensure water isn’t seeping into those crevices. If major issues do turn up, you may be able to seek compensation for those repairs.

10. Air conditioning – flagged in 9.9% of reports

According to the Porch survey, most homebuyers negotiate only $500 for AC repairs, but the actual costs are much higher — think thousands of dollars, not hundreds.

Photo: James Bombales

11. Exterior paint – flagged in 9.6% of reports

If the house was constructed before 1979, your inspector will likely conduct a lead paint test. Additionally, if the exterior paint is peeling, some lenders (like the Federal Housing Administration and Veterans Affairs) will not approve the loan due to concerns over health and safety.

12. Foundation issues/cracks – flagged in 8.9% of reports

Home inspectors can look for obvious signs of foundation problems like cracks in basement walls, damaged bricks and uneven floors. If you and your home inspector suspect the problems are serious, you may want to bring in an engineer. But consider it money well spent — foundation fixes can cost $10,000 or more. Gulp.

Source: Livabl.com –  

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Fed unveils First-Time Home Buyer Incentive in Barrie

Fed unveils First-Time Home Buyer Incentive in Barrie 

A federal official unveiled Canada’s First-Time Home Buyer Incentive in Barrie, ON last week.

Adam Vaughan, the parliamentary secretary to the minister of families, children, and social development, said that $1.25 billion has been allocated for the program over the next three years. The program, which will begin on September 2, is expected to reduce monthly mortgage payments required for first-time buyers without increasing the amount they need to save for a down payment.

“Housing affordability is a major issue and a major concern for families,” said Vaughan. “This region has become one of the most expensive in the world and the prices of downtown Toronto are starting to echo up into communities like Barrie, and the success of Barrie itself is also having an impact on housing values and land costs.”

The program will be available to first-time home buyers with qualified annual household incomes of up to $120,000. Under the incentive, the Canada Mortgage and Housing Corporation (CMHC) will provide up to 10% on the purchase price of a new build and 5% on a resale.

Source: Mortgage Broker News – by Duffie Osental 31 Jul 2019

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When is a good time to get into the market?

Image result for best time to buy real estate

When it comes to real estate, one of the most common questions is: when is the best time to buy? The typical response is the best time to buy was yesterday and the second best time is today. That response is a bit clichéd as many homebuyers have heard it before and it doesn’t provide any practical advice.

Buying a home will likely be the largest purchase people make in their lives which is why they want to be as informed as possible when making their decisions. It’s impossible to predict where the markets are headed, but there are some scenarios where it makes sense to get into the market.

Early in the year

Historically, real estate sales slowdown at the start of the year. This happens because many people aren’t exactly excited to go out in the winter to search for a new home. Although there’s usually less inventory available during this season, there’s an opportunity for buyers since sellers may be more motivated to negotiate on price to complete the sale.

When interest rates are low

Over the last couple of years, interest rates in Canada have been at near record lows. In 2018, when the Canadian economy was doing well, the Bank of Canada increased interest rates three times from 1% to the current rate of 1.75%. The economy has since cooled and a recent poll found that many economists expect rates to remain flat until the end of 2020.

In the first half of 2020, we’ve seen mortgage rates fluctuate both up and down. In early 2019, 30-year fixed mortgage interest rates rose to between 4.5% and 5.0%. However, right now, we’re seeing rates as low as 2.54% which can be very appealing to potential and current homeowners.

When your financial situation is optimal

Buying a home is a goal for many Canadians, but it’s easier to make that a reality if your financial situation is in good standing. Ideally, you should have a secure income, good credit score, no or limited debt, and a healthy down payment.

By having all of the above, lenders are more likely to approve you for a mortgage in the amount you’re looking for. That’s not to say that lenders will ignore potential homeowners who have debt or are on a single income, it just means that they may not be extended as much money.

When inventories are high

Real estate is cyclical and things can change fast. A seller’s market can quickly become a buyer’s market if a lot of homes are up for sale. Generally speaking, spring and summer are when listings are at their peak, but there’s also an increased amount of buyers so that doesn’t automatically mean buyers will get a deal.

The highest month for home-for-sale inventories is May, followed by April and June which lines up perfectly for potential homeowners who are looking to move in by Labour Day. If there are more homes for sale compared to buyers, then sellers will need to ensure their home is priced competitively so they can get it off the market.

When the economy is doing well

Although interest rates may rise when the economy is doing well, it may still be a good time to buy a home. Those looking to buy who have been pre-approved for a mortgage may not feel the effects of any increased rates and they may be able to take advantage of new market conditions.

With an increased economy, there may be more construction of new homes which means more inventory for potential homeowners to choose from. This scenario also helps current homeowners who are looking to move up on the property ladder since they’ll likely have an easier time selling their current home before buying a new one.

The pros and cons of buying real estate

The above factors are all good reasons to start looking for a home but note that homeownership isn’t for everyone. If you’re looking to enter the real estate market, it’s important to look at the pros and cons early so you know what you’re getting into.

Pros

  • As a homeowner, you can choose what to do with your home
  • Over time, you build equity in your home
  • You may be able to generate income from your home by renting it out (or a portion of it)
  • There are some tax benefits e.g. tax deductions on mortgage interest

Cons

  • As a homeowner, you’re responsible for all the maintenance and repairs
  • There’s limited flexibility if you need to relocate quickly
  • A huge part of your net worth is locked into your home which makes it difficult to diversify
  • There are additional expenses that renters don’t have such as property tax and repairs

As you can see, deciding on when is a good time to get into the real estate market depends on quite a few things. There’s never an ideal time, but you can look at the current market conditions as well as your own financial situation and then decide if you’re ready to become a homeowner.

 

Source: Equitable Bank – Joe Flor Director, National Sales


Equitable Bank is a major lender partner to the mortgage broker network and offers mortgage products to meet almost every client need. To find out more call us at 905-813-4354 or stop by our office for a chat.

 

 

 

 

 

 

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It’s going to be hard to own a home in Toronto if you are not part of the 10%: report

In Toronto, you need more than $160,000 to buy a house; meanwhile, in Regina, the most affordable city, you only need $70,000

The Canadian dream of home ownership is slipping away: Tim Hudak5:17

Canadians looking for a home in major cities will likely have to look elsewhere, unless they count themselves among the country’s richest.

New analysis from RateSupermarket.ca shows that only those in the top income bracket can afford to buy homes in many of Canada’s major cities like Toronto, Vancouver and Montreal.

It cites a recent study from Zoocasa, a Canadian real estate website, which places the benchmark prices for Toronto at $873,100 and Vancouver at $1,441,000. Only the top 10 per cent can afford to live in Toronto and only the top 1 per cent can live in Vancouver.

Jacob Black, managing editor of RateSupermarket.ca, had this advice for potential homeowners: “Step one is to have a realistic idea of what you can spend. Step two is look outside the box that you might have looked in before,” said Black. “We’ve seen a trend develop in terms of cohabitation, multi-family homes, looking at options like condos, smaller apartments outside of the major city area.”

The RateSupermarket analysis compares these benchmark prices against the household income needed in order to afford a home in 12 Canadian citiesincluding Victoria, Hamilton, Kitchener-Waterloo, Calgary, Ottawa-Gatineau, London, Edmonton, Saskatoon and Regina.

RateSupermarket’s criteria for determining household income was to assume a 3.25 per cent five-year fixed mortgage rate, $10,000 in debt, a monthly lease vehicle payment of $300, a down payment of 20 per cent, and amortization of 25 years.

Using these figures, one’s household income in Vancouver would need to be above $240,000 in order to afford a home. In Toronto, a household would need more than $160,000.

A surprising result for Black was the difference between Toronto and Hamilton — a city that’s 70 kilometres away, which requires a more ‘reasonable’ $120,000 household income for a $630,000 home.

“I think that really highlights that there are opportunities in thriving vibrant areas,” said Black. “It’s just not necessarily in the same traditional areas you’ve been looking in or that you’d be expecting.”

This seemingly insurmountable unaffordability applies to starter homes as well. With these homes in Vancouver, only income earners in the top 25 per cent can afford them. The benchmark unit price is $656,900. Toronto is not far behind at $522,300.

Above all else, Black stresses a wise use of resources when it comes to the property market.

“I don’t see (the market) reversing. I don’t see a correction, but I think it’s important people do what they can with the resources they’ve got,” said Black.

Regina emerged as the most affordable city in the study, with a benchmark price of a home of $275,900 and a minimum household income of $70,000.

Here’s the full list:

  • Vancouver: House price: $1,441,000. Household income needed: $240,000
  • Toronto: House price: $873,100. Household income needed: $160,000
  • Victoria: House price: $741,000. Household income needed: $140,000
  • Hamilton: House price: $630,000. Household income needed: $120,000
  • Kitchener-Waterloo: House price: $523,720. Household income needed: $110,000
  • Calgary: House price: $467,600. Household income needed: $100,000.
  • Ottawa-Gatineau: House price: $444,500. Household income needed: $90,000
  • London: House price: $426,236. Household income needed: $90,000
  • Montreal: House price: $375,000. Household income needed: $80,000
  • Edmonton: House price: $372,100. Household income needed: $80,000
  • Saskatoon: House price: $301,900. Household income needed: $70,000
  • Regina: House price: $275,900. Household income needed: $70,000
Source: Financial Post Staff Nicholas Sokic May 30, 2019

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A first-time buyer’s guide to choosing a mortgage plan that’s right for you

I used to think I had a pretty good understanding of mortgages — you contribute a downpayment (a minimum of five percent of the property value if you’re in Canada) and someone (usually a bank) lends you the rest. If you fail to pay your mortgage back, your lender can take your house away. Ouch.

When I started looking into buying a cottage, I realized my mortgage knowledge fell seriously short (by the way, the cottage is the inspiration behind our brand new newsletter called The Ladder, about the climb on and up the property ladder). Early on, I jumped on an online calculator and immediately had a lot of questions. How can these interest rates vary so wildly? What is a fixed versus variable mortgage? What does amortization mean? If I put down less than 20 percent will terrible things happen to me and everyone I love? They don’t teach this stuff in school and I learned there is no one-size-fits-all mortgage plan that will work for everyone.

Photo: Romain Toornier 

Enter Matt Yakabuski, an Ontario-based mortgage broker — here to break it all down and help you, me, all of us— understand the variables to help pick the best mortgage plan. If you’re Oprah, or just won the lottery — feel free to stop reading. Everyone else, buckle in!

And if you’re curious, I’ll be sharing more about my cottage mortgage in the next newsletter, landing in your inbox on Wednesday, April 3rd — sign up here!

Um, where do I get a mortgage?

Mortgages usually come from either a bank or a broker.

Think of your mortgage broker as your personal mortgage shopper — they are provincially licensed professionals who have access to multiple lenders, including all of the major banks. They will listen to your needs and goals, analyze the numbers, help you through the qualifying process and find a mortgage product that fits just so.

“Online, you’ll get an idea of what the rates are generally, but they vary based on the downpayment amount, the location, your credit, your income and more. No two deals are alike, no two clients are alike, no two properties are alike,” says Yakabuski.

Banks are trusted, federally regulated lenders that can only access and offer you their own rates and products. You can also get a mortgage from a credit union (an increasingly popular option ever since the mortgage stress test was introduced) or a non-traditional Mortgage Investment Corporation. MICs are typically used by Canadians who have not qualified with traditional lenders and are willing to gobble higher interest rates to get into the property game.

Photo: CreditRepairExpert

How do I qualify for a mortgage?

To qualify for a mortgage, you have to prove to your lender that you can afford it and have a steady stream of income to keep up with payments. They will take a look at your income before taxes, living expenses, your credit score and all of the debts you carry. They will also look at your downpayment amount and the terms of your mortgage.

“Your debt servicing ratio is the main measure we use to qualify people for their mortgage,” says Yakabuski. “Depending on your credit score, you’re allowed to put a maximum of 44 percent of your total income towards debt servicing. This covers your mortgage, your property tax, credit card bills, car loans and any lines of credit.” If your debt eats up more than 44 percent of your income, you won’t be approved by traditional lenders.

Will I pass the mortgage stress test?

As of January 1st, 2018, you also have to pass the mortgage stress test — a calculation used by federally regulated lenders to determine if homebuyers can keep up with their mortgage payments if interest rates were to rise. If you can demonstrate that you can withstand your mortgage at the Bank of Canada’s benchmark qualifying rate (at 5.34 percent at the time of writing) or your interest rate plus two points — whichever amount is greater — you pass.

The mortgage stress test has reduced purchasing power by just under 20 percent. But as Yakabuski puts it, “If interest rates do go up, you know you can afford it.”

Photo: adventures_of_pippa_and_clark/Instagram

Should I take the biggest loan I can get?

Your lender will tell you the maximum loan you can qualify for (and they can help you find ways to increase that amount). But the maximum isn’t necessarily the loan you should take.

“Instead of my clients asking me what they can afford, I ask them what they’re comfortable spending on a monthly basis on their mortgage, property tax, heat, hydro, that kind of thing. And then we’ll work backwards,” explains Yakabuski.

Everyone has different comfort levels. “Some people are conservative and some people just want to hit their maximum,” he says. In the end, it all comes down to budgeting and making sure you don’t completely wipe out your bank account and end up house poor. If you have to beg your in-laws to cover the closing costs, can’t afford to hire movers or even get the nice coffee beans you like — you may want to consider getting less house than you can actually qualify for, but more financial freedom.

Photo: mandimakes/Instagram

Finding the “best rate” is not as easy as it looks

You may have seen a low rate on a website or on the window at the bank, but not every rate is for you and you have to read the fine print. There are rates for refinancing, rates for rental properties, rates if you’re putting more than 20 percent down (uninsured) and rates if you’re putting less (insured), and on and on.

“Your friend who got a 2.49 percent interest rate six months ago, sorry to say — that’s just not available today — and even if it was, it doesn’t mean you could have gotten it. If you find a rate that seems like a much better deal than everywhere else, there’s probably a reason for that,” explains Yakabuski.

For example, restricted mortgages, which often have lower rates but inflict painful penalties if you break them and prohibit you from refinancing elsewhere before your term is up. “If I sell you a restricted mortgage and then in two years, you have to sell the property, I don’t want to say, ‘Sorry, your penalty is going to be triple the amount of a regular penalty because it was a restricted deal.’ Anyone who is looking out for your best interest is going to take into consideration the portability of the mortgage.”

Photo: James Bombales

How long should my term and amortization be?

The term you choose will have a direct impact on your mortgage rate and how long you’re locked in to the rate, lender, and various terms and conditions of your mortgage product.

“A shorter term length has historically proven to have a lower interest rate. Right now, not so much,” explains Yakabuski. Terms can range from six months to 10 years. “Most people choose a five-year because it’s often the longest term for the best rate.”

Your mortgage amortization period is the length of time it will take you to pay off your entire loan. In Canada, the maximum amortization period is 35 years — but you’ll only have access to this timeframe if you’re putting down more than 20 percent. If you’re putting down less than 20 percent and have an insured mortgage, the maximum amortization period is 25 years.

If you go with a longer amortization period, you will have smaller monthly payments, but keep in mind: you’ll pay more in the long run in interest over the life of your mortgage.

Depending on your mortgage commitment, lenders will only allow you to pay so much extra towards a mortgage before they start penalizing you. How’s it’s calculated depends on the product you’re in and what lender you’re with, but in many cases you will have the opportunity to make lump-sum payments towards your mortgage, to double up payments or to increase the payment amount.

“I suggest taking the highest amortization possible, but if you have the affordability to pay more, make sure you do,” says Yakabuski. “Even with a longer amortization, you effectively could pay at the rate of a 15- or 20-year amortization, saving you thousands of dollars in interest by paying the principal off that much quicker. But should your financial situation change, you could scale back your payments all the way to the 25-year if you have to.”

Photo: James Bombales

Should I get a fixed or variable mortgage?

Fixed mortgages mean the rate you settle on will be your rate for the entire term of your mortgage. A variable rate is going to fluctuate based on what the prime rate is doing (at the time of writing, it’s currently sitting at 3.95 percent). If the prime rate goes down, your rate and payment will go down and vice versa. With a variable rate, there is often an opportunity to save money, but you have to be comfortable with some risk.

Choosing the right strategy often comes down to flexibility. Many Canadians default to a five-year fixed rate mortgage, but if there’s a possibility you may be moving on before then, the penalty for breaking the term can get costly, whereas a variable mortgage will cost you three months of interest.

“Variable is a good option because they traditionally have a lower interest rate and you have flexibility should you need to get rid of it quicker with the smallest penalty possible,” says Yakabuski.

Should I go for an open or closed mortgage?

Let’s say you come into a large inheritance and want to pay off your mortgage in full or you unexpectedly have to ditch your property before the term is up.

With a closed mortgage, you cannot repay, renew or renegotiate before the term is up without incurring penalties. With an open mortgage, you can do all of the above without penalty — but the interest rates are often much higher.

“I rarely recommend an open mortgage, even when people say they’re going to flip the property,” says Yakabuski. “The reason is because an open mortgage right now has an interest rate of about six percent (all open terms are variable). Whereas the interest on a closed, variable mortgage is, let’s say, three percent less. If you’re going to sell the place inside two, maybe three months, then open makes sense. But if you’re going to keep it for four months plus, generally the three-month interest penalty on breaking a closed, variable mortgage can save you thousands in just six months.”

Photo: alyssacloud_/Instagram

Now for the fun part — finding a home

Before you even start looking at properties, it’s important to get your finances in order so you can crunch the numbers when you do find places you like. You’ve saved for a downpayment, qualified for a loan and have chosen a mortgage plan that is right for you. You’re officially a mortgage badass and it’s time to start house hunting. You’ve got this.

Source: Livabl.com –  

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Homebuyers to get new mortgage incentive, Home Buyer’s Plan boost under 2019 budget

Homebuyers to get new mortgage incentive, Home Buyer’s Plan boost under 2019 budget

 

 

 

WATCH: Federal budget 2019: Incentives for first-time home buyers, skills training

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Can’t afford to buy a house? The government may take on part of the cost.

That is the gist of the boldest proposal that Budget 2019 puts forth to help more middle-income Canadians fulfill their homeownership dream.

Under the new CMHC First-Time Home Buyer Incentive, the Canada Mortgage and Housing Corporation would use up to $1.25 billion over three years to help lower mortgage costs for eligible Canadians.

 

The money would go to first-time home buyers applying for insured mortgages. Borrowers would still have to pony up a down payment of at least five per cent of the home purchase price. On top of that, though, they would receive an incentive of up to 10 per cent of the house price, which would lower the amount of their mortgage.

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.

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.

Watch: Finance Minister Bill Morneau presented the 2019 federal budget in the House of Commons Tuesday.


Home owners would eventually have to repay the incentive, possibly at re-sale, though it’s unclear yet how that would work.

Also, mortgage applicants still have to qualify under the federal stress test, which ensures that borrowers will be able to keep up with their debt repayments even at higher interest rates.

However, the incentive would essentially lower the bar for test takers, as applicants would have to qualify for a lower mortgage.

On the other hand, the amount of the insured mortgage plus the CMHC incentive would be capped at four times the home buyers’ annual incomes, or up to $480,000.

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).

The government is hoping to have the program up and running by September.

Home Buyer’s Plan gets a boost

As was widely anticipated, the government would also enhance the Home Buyer’s Plan (HBP), which currently allows first-time buyers to take out up to $25,000 from their registered retirement savings plan (RRSP) to finance the purchase of a home, without having to pay tax on the withdrawal. The budget proposes raising that cap to $35,000.

The new limit would apply to HBP withdrawals made after March 19, 2019.

New measures would encourage more borrowing, possibly drive up home prices

Economists said the new CMHC incentive and the enhanced HBP would encourage Canadians to take on more debt, stimulate housing demand, and possibly push up housing prices.

“It’s a different kind of borrowing,” David Macdonald, senior economist at the Canadian Centre for Policy Alternatives, said of the CMHC incentive.

And with a home-price limit of around $500,000, the program is unlikely to help middle-class millennials buy homes in Vancouver and Toronto, where average property values are far higher, said TD economist Brain De Pratto.

 

Those taking advantage of the higher HBP limit, on the other hand, would have to keep in mind that the government is not extending the program’s repayment timeline, said Doug Carroll, a tax and financial planning expert at Meridian.

Home buyers must put the money back into their RRSP over 15 years to avoid their HBP withdrawal being added to their taxable income. Now Canadians will have to repay a maximum of $35,000 – instead of $25,000 – over the same period, Carroll noted.

In general, the economists and financial experts Global News spoke to saw the budget as being focused on demand-side housing measures, rather than policies that would encourage the construction of new homes.

And while the budget does earmark $10 billion over nine years for new rental homes, it does not propose major tax breaks for homebuilders.

Tax incentives proved to be an effective way to stimulate residential construction in the past, said Don Carson, tax partner at MNP.

“They really drove supply,” he said.

Source: Global News –

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