Federal Budget 2019 / Mortgages / First-Time Home Buyer Incentive & Home Buyers’ Plan-CMHC-EXPLAINED

Federal Budget 2019 / Mortgages / First-Time Home Buyer Incentive & Home Buyers’ Plan-CMHC-EXPLAINED

Well hello! Today we’re going look at the
Federal Government and their 2019 budget proposal, and we’re going to focus on
mortgage components in that budget. The budget is well over 400 pages long, and
yet they have two components that are specific to mortgages. I’d like to
address that with us today and explain that to all of us. So, one is concerning
first-time homebuyers – they have an incentive, and the other one is the home
buyers plan, and they say they’re modernizing it. All right. Now as I explained, we’ll hit the first-time homebuyers incentive first. So, it’s in partnership
with CMHC, which is Canada Mortgage and Housing Corporation, and it’s important
to know that it is, in fact, the Federal Government. It’s an arm of the Federal
Government. They’re set up as a crown corporation of the Government of Canada. And so this is, it’s a shared equity mortgage strategy, and I’m going to
explain here. CMHC first-time homebuyers incentive is a shared equity mortgage
that would give eligible first-time homebuyers the ability to lower the
borrowing costs by sharing the cost of buying a home with CMHC, so you’re
partnering with the Federal Government and they’re going to basically share in
terms of purchase of the equity in that home. So the incentive would reduce the
monthly cost for you if you’re going to buy a home and you’re a first time
homebuyer and you participate, which is good, right? And this will give first-time
homebuyers greater flexibility. We all love flexibility! And purchasing a home
in doing that but also in the ongoing cost of the home, and it’s just because
it lowers your cost a little bit and so it makes it a little easier to qualify in
light of the stress test. And by the way, they didn’t modify the stress test at
all so stress test remains the same, but also your monthly cost will be a little
lower so may help you manage your ongoing monthly expenses of owning a
home. CMHC would offer qualified first-time homebuyers a 10% share of
equity, shared equity mortgage for new constructed homes so if
it’s a newly constructed home, they’ll participate, they’ll put 10% in. If it’s a used
home or an existing home, they’re going to participate at 5% in, which is helpful. And we’ll look at some numbers in a second. So the loan, whether it be 10% or 5%,
the loan is to be paid back, of course, like when you sell you can pay it back
or you can pay it back in advance if you wish. So, to give you an example of what
we’re talking about. So the borrower purchased a $400,000 home. So if they put 5%
down, which is $20,000, that brings the cost down to $380,000 so that’s the amount
that would be underinsured that you’d have to get insured with 5% down. However,
CMHC, the Government, they’re going to put another 5% which is $20,000, so another
$20,000, so 5% of this $400,000, so that brings it to a further – brings it down to
$360,000 so that’d be the amount you need to get insured so the mortgage would be
on that amount. Okay? Now the incentive would be
available to first-time homebuyers with household incomes under $120,000 per
year, so if your income, as a household, is higher than that, then you can’t – you
can’t participate in this program. Your insured mortgage and the incentive
amount cannot be greater than 4 times your household – the annual household
income – so I’ll show you the math of what I’m talking about here. So on the maximum
side, if your household income is $120,000, all right, so 4 times $120,000 is $480,000. So you could qualify for a purchase
of a home of $505,000, you know you’re going to put 5%
down so those are kind of the numbers – it’s not quite 5%,
it’s off a little bit but that’s the size of the house you can – you can – purchase. So if your income was $95,000, you could purchase
a home based on this program of $400,000. So more details are
going to come out later this year and then they’re planning to, you know, get this
operational by September of this year. Now, just like with other programs that
the Federal Government may have implemented, whether it starts at that
time or not, if it’s delayed, who knows what’s going to happen if the Federal
Liberals don’t get in, then, at the next elections, then this program might not
proceed either. So, so this is an example of 5% down, the house is $400,000, so the insured mortgage would be this amount and, and this
is without, without the incentive. You’ll see that your monthly mortgage would be
$1,973. Now this illustration is amortized over 25 years at an interest
rate of 3.5%. So, right here, is complementary to that would be is, if it is under the incentive program, and if it’s a new build, the CMHC puts in
10%, so instead of the insured amount being 95% of $380,000, it drops
down to $340,000 in this case – 85%. So the monthly
mortgage obligation will be around $1,745, which is $228 a month, and, in over a year, it’s $2,736. So that’d be kind of the math. So a bit of a savings there, you may like
that, but also from a stress test standpoint, you have to qualify for a
lower amount which is helpful from a mortgage perspective. So now we’re going
to turn our eyes on the home buyers plan. So basically what they’re saying here
is currently you can withdraw $25,000 out of your RRSP, if you’re a first-time
home buyer, to use as down payment on the mortgage, closing costs, things in
reference to buying your home. So the Federal Government, they’re proposing, in
this budget, to increase this amount by $10,000 so that you could have up
to $35,000 you can withdraw out of your RRSPs. One of the dilemmas
that people are going to find is, you know I’ve met with tons of people over the years, and a
lot of first-time home buyers don’t have $35,000 in RRSPs to draw on so I’m not sure how many people will be able to take advantage of this
but I know that some will. So unlike your regular RRSPs, the home buyers plan
withdrawals are not added to your personal income for income tax purposes. Instead, you have to repay over 15 years. You can repay as soon as you want but
you repay over 15 years, and, if you don’t, it’s included as individual income on
your income tax. So let’s say a couple, so if a couple who both qualify, they can
each get $35,000 of the RSP so $35,000 plus $35,000 so $70,000, so if they had a lot of RSPs as a couple, they could pull $70,000
total, which is pretty good. Now a little something they added in here. So if
there’s marriage breakup or common-law partner breakup and they don’t meet the
obligation of first-time home buyer, they can still participate in the program
because after a breakup and they want to get a home, it’s often more difficult
on one income. However, they will permit you to draw out of that. So that’s
basically the two things that come out of the Federal Budget of 2019 on the
mortgage side. If you have questions, please write them down below and, and
we’ll see we’ll figure this out. But more information is going to come. There’s only
so much detail they provided in the budget. So, listen. Thank you so much for
for being with me today and if you have any questions, write them
below and we’ll address that. Have a great day!

22 thoughts on “Federal Budget 2019 / Mortgages / First-Time Home Buyer Incentive & Home Buyers’ Plan-CMHC-EXPLAINED

  1. Please post any questions of clarification. #federalbudget #NDP #Liberal #liberalparty #conservativeparty #andrewsheer #justintrudeau

  2. Hi! Do you think the Stress Test will stay?

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  4. Just so we're clear hear, please do not go around telling ppl that they can purchase a 505k property under this ridiculous liberal plan that won't work and will fail. Your math is way off as well. A maximum combined household income of 120k is then multiplied by 4 times that income. That results in 480k as a maximum purchase price. You do not, under any circumstances add the first time buyers required 5% [$24,000] downpayment to the purchase price. That would be counterproductive.

    Regardless, at the moment, this liberal plan is nothing but an election promise and furthermore, a maximum purchase price of 480k in the GTA does not exist. I'm sure that one day it will exist, as house prices will continue to decline and correct significantly this year, but it could be much worse, depending on how hard the economy gets hit, with respect to the how bad the recession is.

  5. Is this in Canada?

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  7. If the Federal Liberals don't win the Federal Elections in October 2019 these First-Time Home Buyer Incentive and the HBP might be overturned. Keep in mind that the Federal Conservatives Party and the Federal NDP Party will most likely have an alternative view on how to improve any First-Time Home Buyer strategy or maybe even modify the Mortgage Stress Test to enhance everyone's ability to qualify for a mortgage. Time will tell.

  8. The Federal Liberals released their Federal Budget 2019 for all of Canada to see. So far, this has not been well received by the mortgage industry but if the Federal Liberals, under Justin Trudeau get re-elected as the Government of Canada we'll most likely see this budget get adopted. If the Federal Liberals under Justin Trudeau do not get re-elected then this First-Time Home Buyers Incentive and Modified Home Buyers' Plan (HBP) won't probably get adopted.

  9. To view the actual Federal Budget 2019, please click on this link (464 Pages Long): https://budget.gc.ca/2019/docs/plan/budget-2019-en.pdf

  10. Please follow me on Facebook: https://www.facebook.com/markalbertmortgages.ca/

  11. Written Submission for the Pre-Budget Consultations in Advance of the 2019 Budget
    By: Mortgage Professionals Canada

  12. Mortgage Industry Reacts to Liberal Budget https://www.canadianmortgagetrends.com/2019/03/mortgage-industry-reacts-to-liberal-budget/

  13. Hey do you know what will happen say if the first time buyer needs a cosigner who isnt a first time home buyer

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  15. Not a criticism of you in any way, but it would be far more useful to do something to drive down the cost of over-priced homes. Rather than saddling people with huge mortgages (partly by loaning them some of the money), they should address the over-inflated prices. It's criminal that people born and raised, say in Vancouver, cannot afford to live/remain there due to ridiculous prices. Foreign investors buying power should NEVER be allowed to drive up the prices. I say this as an immigrant myself.

    But of course house prices will NEVER be driven down on purpose – there's too much money to be made in taxes, etc. As usual the almighty dollar is put before families – partly why society is in such a mess. Families are getting hammered on every side

  16. In Ireland, incentives like this which were supposedly to help people get on the property ladder, just served to drive the price of low-cost houses upwards. Sellers/Realtors know that certain homes are suited to those who will avail of this strategy and they increase the price of homes accordingly. These strategies rarely help those it's intended for. It's like electric cars. Dealers know people factor in the tax rebate and they increase the price accordingly to make even more money. Look how expensive a little electric car costs! It's nuts

  17. Thank you for explaining explicitly, do you know what’s the highest level of income, a single person to have, to qualify for this program?

  18. Hello! I often heard that it is possible to buy an home without a deposit, however I have yet to meet one person who have done it successfully. Is it possible to buy a house without a deposit and if so does the first time home buyer incentive applies in this situation?

  19. MORTGAGES DON'T NEED TO BE CONFUSING —- Mortgage Solutions To Solve Debt Dilemma's Don't Need To Be Confusing. Check out my video on this link & Reach Out https://www.moneywithmarkalbert.ca/mortgage —- Contact me to book a private conversation on how I can help

  20. Update on the First-Time Home Buyer Incentive from the Federal Budget of March 2019. Canadian Mortgages ONLY. Mortgages for Canada. Federal Budget from Government of Canada. First-Time Home Buyer Incentive (FTHBI for short).

  21. The Government has another UPDATE. They Released the OPERATIONAL Policy Manual. I read it and did an updated video. Watch here: https://www.youtube.com/watch?v=e7-1XDRGI0M

  22. Great video! Are pre-construction homes classified under "newly constructed homes"?

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