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21 Mar

Some detailed thoughts about the home buyers incentives announced in the 2019 Federal Budget


Posted by: Robert Ganzhorn

The 2019 federal budget was announced yesterday with some much hyped housing measures (justified or not). I’ve taken the liberty of attaching the 12 pages from the budget that pertain to housing measures within it for those of you that want to read it. You can get it here: 2019 federal budget housing measures

The main highlights of the housing measures contained in the budget are below and few details are available as yet. What was provided was a very general framework and it may be a few weeks until we get those details. What we know so far is below.

First time home buyers incentive and increased allowable HBP withdrawals

  • Applies only to First time home buyers
  • Applies to mortgages insured with CMHC.
  • Only available for households with income of less than $120,000 annually
  • The combined mortgage and incentive amount cannot be for more than 4 times the annual household income. So basically maximum mortgage is the mortgage amount + cmhc incentive + cmhc insurance premium
  • No regular payments are necessary for the incentive amount
  • It is repayable
  • The incentive allows for an interest free top up towards the down payment from CMHC as follows: a maximum of 5% for existing homes and 10% for new homes
  • The program would include “eligibility criteria” to ensure “participants are able to afford the home”
  • This is a 3 year program with $1.25 billion allocated towards it. Start date is expected as early September 2019
  • The incentive addresses AFFORDABILITY NOT MORTGAGE QUALIFICATION. It is intended for those that can already qualify for a mortgage under the latest mortgage qualification rules.
  • So guess what? The stress test and all other rules making qualification so difficult still apply to all borrowers
  • It’s unclear whether the CMHC down payment portion will be allowed to be used as part of the mortgage qualification process. It would make sense that it would be and then it could help (minimally) with qualification but nothing significant enough to allow a large number of previously unqualified buyers to enter the market.
  • Withdrawals from RRSP accounts have been increased to $35,000. This is all fine and dandy but there aren’t too many first time home buyers with that much in their RRSP
  • Use of the incentive may actually result in a lower purchase price for some due to its limit of 4 times household income

Unanswered questions on this offering so far

  • What’s the definition of a first time home buyer? It is the HBP definition or maybe the land transfer tax definition or ?)
  • Will this apply to conventionally insured mortgages as well as high ratio mortgages?
  • Will this also be available through the two other mortgage insurers, Genworth and Canada Guarantee?
  • There are a lot of possible definitions of income here. Is it income for income tax purposes or perhaps income for mortgage qualification purposes? They can be different
  • How and when is the incentive repayable
  • Is it possible to refinance with the incentive still in place?
  • What exactly are these eligibility requirements?

Stay tuned for more as details are released