- What do the new incentives in the Federal Budget
mean for home buyers?
(upbeat music plays)
Okay, so the Federal Government today
released their 2019 budget.
They made some changes.
A few to the mortgage rules.
Targeted, let's call a spade a spade on this,
probably vote buying, and that's coming from somebody who,
I'm politically agnostic, I don't really identify with
Liberals or Conservatives.
I'm an economist so that probably
makes me fiscally conservative.
I don't think the rule changes were
anything more than just vote buying.
They're gonna help a little bit
for first time home buyers.
But really that's the only people affected.
Let's get into the details of the changes.
So, the first change, and probably the prudent one
is the increase to the limit that a first time home buyer
can take out of their RSPs, interest free,
in order to purchase a home.
It's increased from $25,000 to $35,000.
I think when you have rising housing prices,
giving access to borrow money that you've saved
anyways yourself, is probably a good idea.
So I think that's a great change, prudent change,
and something that will definitely help.
We see quite frequently clients who kind of
butt up against that limit of what they can take
out of their RSP, interest free.
Increasing it to $35,000 is a good change.
Now let's talk about the second change.
And this is the Shared Equity Ownership
with CMHC on purchasing a property.
This is for first time home buyers who have an income
of up to $120,000 for the household.
And basically what it does is, it says okay
on a $400,000 mortgage, you still gotta put 5% down.
But we're going to match or actually
go over and above matching, depending on
what type of property you're gonna buy.
So, if you're buying a resale property,
CMHC is saying we'll give you $20,000
in an equity share that you have to pay back
when you sell the property eventually.
And if you're buying a new home,
you can go up to $40,000.
So this is by percentage, not by dollar amount.
This is just on a $400,000 example.
It's basically 5% and 10% equity share
in the property if you're buying with the CMHC mortgage.
Now I'm guessing there's gonna be some sort of
increased insurance premium for this.
But basically what it allows a client to do is
instead of buying a $400,000 house
and having a $380,000 mortgage,
they'll have a $360,000 mortgage instead,
on a resale property.
Or on a new property they'll have a $340,000 mortgage.
Now, I don't get why they've incentivized
consumers, first time home buyers, to buy new.
I'm a big believer in a first time home buyer
buying a resale house because you know
the house has been lived in and the
problems that happen in those first couple of years,
and there's almost always problems in
the first couple of years,
have kind of been ironed out.
I like a first time home buyer buying a resale property
but for some reason the Federal Government
has decided to incentivize new home sales.
Now I'm guessing that's probably because
there was better lobbying from new home sales people
than there were from realtors.
And I guess you can argue that new home sales,
building houses, creates more jobs than
incentivizing resale housing.
But, you know, why they did that, I'm not sure.
I still think this comes down to
looking a lot like vote buying.
But hey, it gives a purchaser the ability
to buy with a smaller mortgage.
Smaller mortgage means smaller payments
and a little bit more of a manageable mortgage.
To put this another way, if somebody could only buy
a $360,000 property before, now they're looking at
being able to purchase close to a $400,000 property
if they're buying a brand new build.
So, you know, it's interesting, it's targeted.
I think they could have made this a lot simpler.
Taking politics out of this, you go back to the
Conservative Government changes that were made,
they were all fairly simple.
It was like remove 30 year reamortization
and 35 year reamortization and make specific changes.
Now all of a sudden the Liberals, in the last four years,
have just made the mortgage market super complicated.
That's good for me.
I'm a mortgage broker.
It means that clients need my services because you know,
just walking into one bank doesn't necessarily mean
they're getting the right product.
Or what's available at BMO may not be available at RBC.
And knowing where certain things are available,
and being more specialized,
creates more market share for us.
But at the end of the day I don't get why
we have to make everything so complicated.
By the way, the bureaucratic nightmare
that this is going to create, trying to manage
who has equity in what house, and all of that crap,
it's absolutely ridiculous.
But I guess that means more jobs too.
So, you know, we'll see what happens.
I like the RSP change.
Not sure I'm a huge fan of the equity change.
By the way, don't expect to be able to do
an equity share with CMHC until September 2019.
Closer to when the vote will be.
I'm guessing that the Federal Government
is hoping that if they implement the changes
in September 2019, closer to when the
Federal election will be, that you know
some first time home buyers are gonna show up
and show their enthusiasm and their appreciation
at the ballot box for these new changes.
So, interesting changes today.
We'll see what happens.
I don't know what it's gonna look like.
I don't know if it's gonna have more effect
on the political landscape
or the mortgage and real estate landscape.
But definitely it's going to have at least
some sort of effect and time will tell
what happens with it.
So, that's my thoughts on the Federal Budget today.
If you've got yours, leave them in the comments below
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