The Canada Mortgage and Housing Corporation?s First-Time Home Buyer Incentive falls short of helping those it is targeted toward
Josh Sherman
Livabl
The co-founder of a popular Canadian rate-comparison website says the Canada Mortgage and Housing Corporation’s First-Time Home Buyer Incentive falls short of helping those it is targeted toward to begin with.
“The key issue remains qualifying, and this program diminishes the amount that a first-time home buyer can qualify for by about 15–20 per cent,” explains James Laird of Ratehub.ca in a statement.
The shared-equity mortgage program, first announced this spring with the Liberals’ 2019 federal budget, comes into effect this September. It will see the federal government contribute up to 10 percent towards the cost of a home in exchange for an equivalent equity stake in the property.
But Laird says that limits to the program — the maximum mortgage is capped at four times a household’s income to a top limit of $120,000 — stand in the way of it helping those most likely to want to take advantage of it.
“[T]hose not participating in the program can actually qualify for a mortgage that is 4.5–4.7 times their income,” he explains.
Laird suggests would-be participants are those who want to buy at the maximum amount they can qualify for.
“However, because the program diminishes how much you 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,” Laird explains.
Comments from Laird follow today’s announcement from CMHC providing further details about the program.
CMHC confirmed that there is no interest on the incentive amount and that participants have 25 years to repay the incentive, or when the project is sold, whichever comes first.
The Crown corporation is establishing a $100-million fund to attract mortgage providers to participate in the program.
On a $500,000 home, the program can help a household up to $286 a month, or $3,430 annually.
“Thanks to mortgage payments that are more affordable, many families will have hundreds of dollars more each month in their pockets – money to spend on things like healthy food, sports activities for their kids, or even save for the future,” says Finance Minister Bill Morneau in a news release.
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