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Hombuyer incentives web

Federal government releases details on homebuyer incentive programs unveiled in Budget 2019

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Federal government releases details on homebuyer incentive programs unveiled in Budget 2019

 

Hombuyer incentives web

The federal government has released the details of the first-time homebuyer incentive programs promised in March in the 2019 budget.

Beginning Sept. 2, 2019, the First-Time Home Buyer Incentive will help middle class families take their first steps towards homeownership by reducing monthly mortgage payments required for first-time homebuyers, without increasing the amount they need to save for a down payment. This program complements other measures taken in Budget 2019 to support first time homebuyers with their down payment such as increased RRSP withdrawal limit from $25,000 to $30,000 The government has allocated $1.25 billion over three years for the program. The incentive will be available to first-time homebuyers with qualified annual household incomes up to $120,000.

Budget 2019 also previewed the Shared Equity Mortgage Provider Fund, a five-year, $100-million lending fund to assist providers of shared equity mortgages to help eligible Canadians achieve affordable homeownership. This will support an alternative homeownership model targeted at first-time homebuyers, help attract new providers of shared equity mortgages and encourage additional housing supply. The fund will launch on July 31, 2019, and will be administered by CMHC.

 

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“Through the National Housing Strategy, more middle-class Canadians – and people working hard to join it – will find safe, accessible and affordable homes,” says Jean-Yves Duclos, Minister of Families, Children and Social Development and Minister Responsible for CMHC.“Our proposed measures will reduce the monthly mortgage for your first home by up to $286. This will mean more money in the pockets of Canadians and will help up to an estimated 100,000 families across Canada.”

First-Time Homebuyer Incentive facts

  • Canada’s First-Time Home Buyer Incentive will help qualified first-time homebuyers purchase their first home as the incentive reduces their monthly mortgage payment, without increasing the amount that they must save for a down payment. The program will launch on Sept. 2, 2019, with the first closing on Nov. 1, 2019.
  • The incentive will allow eligible first-time homebuyers who have the minimum down payment for an insured mortgage with CMHC, Genworth or Canada Guaranty, to apply to finance a portion of their home purchase through a form of shared equity mortgage with the Government of Canada.
  • For the purchase of an existing home, an incentive amount of five per cent may be available. For the purchase of a newly constructed home, an incentive amount of five or 10 per cent may be available.
  • Doubling the incentive for purchasers of new homes encourages new housing supply.
  • No on-going repayments are required, the incentive is not interest bearing and the borrower can repay the incentive at any time without a pre-payment penalty.
  • The buyer must repay the incentive after 25 years, or if the property is sold.

 

These details confirm that the First-Time Home Buyer Incentive program will be an ownership stake in the property of qualified homebuyers, whereby the government will participate in appreciation of the property and – in the case of the property devaluing – depreciation as well.

“The key issue remains qualifying, and this program diminishes the amount that a first-time homebuyer can qualify for by about 15 to 20 per cent,” says James Laird, co-founder of Ratehub Inc. and president of CanWise Financial. “This is because the program limits the mortgage amount to four times the households’ income, whereas those not participating in the program can actually qualify for a mortgage that is 4.5 to 4.7 times their income. Household income for qualified homebuyers is also capped at $120,000.”

Those who would be attracted to the program would be Canadians who are trying to purchase at their maximum qualification, Laird adds. “However, because the program diminishes how much they can qualify for, it doesn’t serve the needs of the group it is targeted at. Canadians can get a larger loan by not participating in the program.”

 

Maximum affordability calculations

A household with $100,000 of income, putting a minimum down payment of five per cent, can currently qualify for a home valued at $479,888 with a $2,265 monthly mortgage payment.

The maximum purchase price for the same household, if they participate in the First-Time Home Buyer Incentive program, drops to $404,858 with a five-per-cent minimum down payment. The total mortgage amount would then be $400,000 (or four times their household income).

Source: Ratehub.ca 

 

Mortgage payment calculations

If the household took a five-pre-cent incentive from the government (for resales), their mortgage amount goes to $378,947, and monthly payment is now $1,810.
If the household took a 10-per-cent incentive from the government (for new homes) their mortgage amount goes to $357,894 and  monthly payment is now $1,710.

Source: Ratehub.ca 

 

 

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Homebuyers undeterred by changes in mortgage landscape

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Homebuyers undeterred by changes in mortgage landscape

Mortgage web

Though 2018 was not the best year for the mortgage landscape, Canadians remain hopeful about buying a home.

A new survey from mortgage rate comparison site Ratehub.ca survey found that, despite recent regulatory changes and interest rate hikes,71 per cent of current non-owners plan to buy a home in the future. And 59 per cent of prospective first-time homebuyers plan to purchase a home within the next two years.

This year saw a number of changes that affected the costs of ownership. In January, the mortgage stress test came into effect, which lowered affordability for Canadians with conventional mortgages by around 20 per cent, Ratehub.ca says. In addition, through 2018, the Bank of Canada announced three 25-basis-point interest rate hikes. (These increases are almost always immediately followed by mortgage rate hikes at Canada’s major banks.) Meanwhile, home prices in large cities continued to edge upwards.

Young Canadians most optimistic

Ratehub.ca, however, says younger Canadians remain the most optimistic about the prospect of homeownership, with Millennial and Generation Z Canadians leading the charge in homebuying intent. According to the survey, homeownership is a goal for:

  • 87 per cent of Generation Zers
  • 81 per cent of Millennials
  • 64 per cent of Generation Xers
  • 54 per cent of Baby Boomers

Canadians’ high intent to purchase is tempered by several possible homeownership hurdles. When first-time buyers were asked about their primary barrier to entering the housing market:

  • 44 per cent cited insufficient down payment funds
  • 17 per cent cited housing market uncertainty
  • 12 per cent said their household income was too low to enter the housing market
  • 9 per cent preferred to maintain housing flexibility
  • 6 per cent said their credit score was too low to qualify for a mortgage

Many Canadians also expect home prices and mortgage rates to continue their upward trend in 2019. Among Canadians who plan on entering the housing market in 2019, 68 per cent believe mortgage rates will increase next year, while 58 per cent believe home prices will rise.

Better understanding needed

An eagerness to enter the housing market, however, hasn’t resulted in a better understanding of mortgage regulations amongst first-time homebuyers, Ratehub.ca says. Forty-seven per centof prospective first-time homebuyers are unaware of mortgage qualification rules that came into effect in 2018.

“The biggest hurdle for first-time homebuyers is saving up for a down payment,” says James Laird, co-founder of Ratehub Inc. and president of CanWise Financial. “While first-time buyers can take advantage of programs like the RRSP Home Buyers’ Plan which are tailored for their needs, buyers can also benefit from building a realistic savings plan to hit their goals.”

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Report: New Mortgage Rules Keeping You From The Home of Your Dreams?

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Report: New Mortgage Rules Keeping You From The Home of Your Dreams?

Not at Meridian!

The mortgage market has absorbed a significant amount of change over the past several years with the most recent update being introduced in January 2018. Among these changes is the requirement for federally regulated financial institutions to introduce a qualifying rate for applicants that can be 2 per cent higher than the rate being offered. As you can imagine, this makes qualifying for your dream home much more difficult.

Meridian, a provincially regulated institution, is not effected by these recent changes. It continues to see strong momentum within the mortgage market and its approach has not changed. Meridian always includes a member-focused attitude that embraces proactive financial advice with engaging dialogue that places financial well-being and, by extension, well-being in general at the forefront. This remains at the heart of what Meridian does.

Therein lies the Meridian difference, not only for its existing members, but for all residents of Ontario. Members can continue to look at moving into the home of their dreams and feel secure that the Meridian collaborative and practical approach will balance what they desire with what they can afford.

Here are some tips and advice that will help you become a successful homeowner.

Save for a down payment: Saving up a significant down payment is extremely important, as it will help to cut down mortgage payments going forward. You should save up at least 5 per cent of the price of the home for a down payment. Saving 20 per cent or more will help you to avoid mortgage insurance or having to be approved at the prescribed Bank of Canada rate.

Calculate your initial costs: Aside from your down payment, you have to factor in closing costs, moving costs, lawyer fees and taxes. So you aren’t surprised later, the general rule of thumb is to add 1.5 to 2 per cent of the total purchase price to cover closing costs.

Get pre-approved: Work with a trusted mortgage specialist to make your first home buying experience easy and well planned. When getting pre-approved, make sure that you are accounting for all your monthly expenses, such as contributing to a savings account. Life has a way of changing at just the wrong time so it is good to have some financial wiggle room for unexpected events.

Know your options: It’s important to know that a first-time homebuyer includes anyone who has not owned a home in the past seven years. The Canadian government is currently offering a First-Time Home Buyer Tax Credit, up to $750, which you can later put towards a mortgage payment. It allows first-time homebuyers to borrow up to $25,000 from their Registered Retirement Savings Plans tax-free to fund their purchase.

MERIDIAN For further information and to find out more about home mortgages and all your other financial needs, visit the website.

MeridianCU.ca

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