In this video we talk about the First-Time Home Buyer Incentive program
recently announced by the federal government — how does it work —
who qualifies — pros and cons as well as what information we're still missing.
That's starting right now.
– Welcome to Homebuyer School brought
to you by Brookfield Residential.
– Hi everyone, Karl here and welcome to another Homebuyer's School video,
a channel where you get the latest strategies tactics and tips from
home buying experts—and remember if this is your first time on this channel and
you want to get the latest strategies from the experts, hit the subscription button
below, hit the little notification bell so you don't miss anything. So today I'm
talking with Mujtaba Syed, mortgage specialist with Bank of Montreal—used to
be TD Canada Trust.
–Use to be TD, yes.
– And today the really popular topic that we're going to talk about is
the First-Time Home Buyer Incentive that the federal government
just launched. So Mo, I know this program is just announced in the federal budget
and so can you give me a brief overview knowing that they haven't fully provided
all the information on them?
– Yeah absolutely Karl. So we do have a lot of
information about it, the stuff that we have found out about it seems like a
great program based on government calculations it should help bring in a
hundred thousand new first-time homebuyers into the market which is
great. So the way it does—first part of the program is to actually increase
the RSP contribution limit for first-time homebuyers from 25,000 to
35,000 which definitely helps in today's day and age when house prices are a lot
higher than they used to be, and the second program is called a first-time
homebuyer incentive program. The way it works is that traditionally if you're
buying a home for example for 400,000 you would need to come up with a
minimum of 5% down which is 20,000 which would then give you a
mortgage amount to be about 380,000. Based on the
new incentive program you're buying a house for 400,000 — you still
have to come up with your 5% out of 20,000 but then CMHC will
take an equity stake in your home meaning that will give you the 10%
of the purchase price which could equate to 40,000 in this scenario.
So your mortgage would actually drop to 340,000
and you actually qualify on the 240,000 compared to 380,000
based on the previous scenario. So that's a monthly savings or
over $222.00. And that for some people is just enough
for them to beat the stress test again into their perfect home.
– So Mo, just to clarify because I always thought when you took the stress test you
took it on the full $400,000—let's say you're buying a $400,000 home—
but what you're saying is first of all, from a stress test
perspective, you're only—the stress test only applies to the mortgage amount so
even if you put 5% down which is $20,000, you're only—the stress test
qualifies you for—the stress test applied to 380,000.
– That's correct.
– But now with a 10% stake that CMHC is putting in, that would be 15%.
– That was a total of 15%.
So it drops down the mortgage amount to 340,000 and now the stress this is
being on 340,000 which is $40,000 less, and for a lot of first-time homebuyers
that's just enough for them to get in which is great.
– And remember if you want
to know more about the mortgage stress test, you can watch our video up here
and in the description below. So Mo, in terms of when they saw—obviously say
First-Time Home Buyer Incentive, how did they calculate—who qualifies
as a first-time homebuyer according to this program?
– So to qualify for the First-Time Home Buyer's, you can't have a
home before or it can't be less if you've owned a home for less than four
years, and then you're buying it again and you would not be considered to be a
first-time homebuyer—and for this incentive program it's very specific you
would need to have a household income of around no more than a $120,000
and your mortgage imbalance with CMHC can't be more than
480,000. So there is a limit, you can't go out and buy a $700,000
house with this—with this program. It is specifically
designed for first-time homebuyers. It is because they're the market that
truly wants to focus on and really want to increase.
– So can you tell me a little bit about the pros and cons in your opinion,
of this program?
– I think it's a great program in my opinion. There's not too much known
about it right now but I definitely see the pros outweigh the cons the pros are once
again, the government's thinking 100,000 first-time new homebuyers that can be
brought into the market this program which is great.
Homeownership has always been a dream for a lot of Canadians, this
would really help them get there, and what it does—and it helps
clients and buyers kind of deal with the stress test so they can actually get in
sooner, right. And the cons just could be we just don't know enough about it at
the moment right now but it seems like a great program.
– Cool. And you touched on missing information, what are we
still missing that we're kind of looking forward to in the next couple months?
– The interesting thing is that this is considered to be an
equity shared stake with CMHC, so CMHC when they give you that
10%, there actually is like a 10% equity stake that they have taken into
the property so technically you could be the 90% owner and CMHC is a 10%
owner. We just don't know how repayment is going to look like. We don't
know if repayment is going to be right away at the time that you sell — if the
property appreciates in value would they get an appreciated amount — would it be
the same amount as what they've given you — are they going to charge an
interest rate or anything like that to kind of give this incentive? A lot of
information will be rolled over the next few months, a lot of people do have lot
of questions, as soon as we find out more we can discuss it for sure.
– Perfect. So Mo, you have anything else to add?
– Yeah, well it's a great program,
there's a lot of information that's still missing so I would say definitely
subscribe to the site, stay tuned so as soon as we get more information rolled
out in the next few months we'll definitely get over to you guys as soon
as possible. I did forget to mention one thing – so the way it works with the
CMHC incentive program, so it's 10% of a brand new built home.
So for example if you're buying with Brookfield, it's a brand new home, never—
newly constructed, it would be 10%. If you're buying an existing home, then
CMHC would do an equity stake of 5%. So there is a difference
there and as soon as we find out more— why the difference is there, we'll
definitely get that information out to you as well.
– Perfect. So the question of the day I have for you is—
will you be using the First-time Home Buyer incentive —
will it actually make you more likely to buy a home this year or in the future?
Let us know in the comments below. Thank you very much for watching,
and remember if you enjoyed this video or found it helpful — make sure to hit the
like button, leave a comment and subscribe. Thank you and we'll catch you
next time.
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