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The Federal Budget introduced a few days ago has been a complete disappointment. Home ownership incentives, mortgage guideline changes and new builder stimulus packages were poor. Not only has it been a disappointment, it has proven that the Federal Government is totally out-of-touch with reality. Two major differences announced are: The increase in borrowing from your RRSPs for down payment ($25,000 increased to $35,000). And a new scheme called the shared-equity mortgage program. There were no changes to increased amortizations or cancellation of the infamous stress test. Consumers must understand that these 2 new “incentives” are merely an alternative form of borrowing. It is not a “savings” incentive and have both fallen short of actually helping Canadians. It’s not easier to buy a home today. Builders have not been encouraged to deliver new stock to the housing market.
First Budget Change
A first-time buyer in our market with $25,000 to withdraw from RRSPs is rare. A first-time buyer with $35,000 saved is even rarer. In my opinion, this tactic falls way short of actually helping people. This will add a further burden of monthly or yearly loan repayments. Remember, you are “borrowing” the funds from your RRSP. You must repay it back within 10 years. So this will add a maximum $3,500/year or $292/month to your budget as an expense, payable to Revenue Canada.
Second Budget Change
Arguably the most talked-about measure of the Liberals’ budget is the First-Time Home Buyer Shared-Equity Incentive. Under this plan, CMHC would help some first-time buyers by advancing up to 10% of the purchase price of a home. This is to take out a smaller mortgage and keep monthly payments lower. The new incentive would only be available for CMHC-insured mortgages. Can’t wait to see what the fees will be for this! Buyers of newly-constructed homes would get 10% of the home price, while those purchasing an existing property would get 5%.
Home buyers will have to repay the CMHC, however, another idiot decision by the Liberals is that it’s not clear how this is done. We don’t know whether homeowners would simply repay the sum originally advanced. In other words, an interest-free loan. Or whether the government would get a share of the sold price. Also, what happens if the house depreciates in value? Will the government participate in the losses? Finally, how will registration at the land registry look like and what will the fees for registration be?