New Housing Initiatives announced in Federal Budget
The Federal Government has announced a number of new initiatives in its 2019 Federal Budget to help make home ownership more affordable for 1st time buyers.
The Government announced the First Time Home Buyer Incentive in the Budget today.
The Incentive allows qualified buyers to finance up to 10 percent of the purchase price of their home through a CMHC shared equity mortgage, on which they wouldn’t have to make any ongoing payments.
So if a qualified buyer purchased a new $400,000 home with a $20,000 downpayment, the borrower’s mortgage would be reduced from $380,000 to $340,000, reducing the monthly mortgage costs by as much as $228 per month.
The CMHC will offer a 10 percent shared equity mortgage for new homes, and a 5 percent shared equity mortgage for existing homes.
The larger percentage for new home sales is aimed at encouraging more new home construction, which has been declined sharply in many parts of the country, including Saskatchewan.
Budget 2019 also proposes to increase the Home Buyers’ Plan withdrawal limit from $25,000 to $35,000, providing first-time home buyers with greater access to their Registered Retirement Savings Plan savings to buy a home.
The budget also pledges to help build 42,500 new housing units across Canada, with a particular focus in areas of low rental supply, through an expanded Rental Construction Financing Initiative.
The Rental Construction Financing Initiative provides just under 4 billion dollars in low cost loans to support the construction of new Rental Housing in Canada.
The budget is also pledging to crack down on tax non-compliance and money-laundering in the housing market, which has become a big problem in Canada’s largest cities, especially Vancouver and Toronto.
The budget didn’t make any changes to the new Mortgage Stress Test, which requires that buyers are able to qualify for a mortgage at 2 percentage points higher than the rate they are being offered. The Stress Test went into effect on January 1, 2018, and has been largely blamed for a drop in house prices, house sales, and the housing industry in general since it went into effect.
Will the new initiatives have an impact on Canada’s struggling housing market, and make it easier for people to purchase homes in Canada? Let’s hope so – what do you think?