New homeowner incentive or election play?

If you haven’t already heard, the Federal Liberal government and the Canada Mortgage and Housing Corporation (CMHC) announced that starting Sept. 2, first-time homebuyers with the minimum down payment required to qualify for a home, and with a household income of up to $120,000, will be eligible for a five per cent loan on a resale home or a 10 per cent loan on a newly constructed one.

CMHC will provide a hand-out of sorts to increase a first-time homebuyer’s downpayment and help give them the edge they need to enter the market.

There’s no doubt that this new initiative will help some first-time homebuyers, but at what cost?

Well, the loans are interest-free and need to be repaid within 25 years or when the house is sold — but CMHC will benefit from the eventual appreciation of the real estate. So, that 10 per cent they helped you out with on a $280,000 home (Translation: $28,000 deposit) may very well turn into a $30,000-plus repayment come resale time. On the other hand, should the home depreciate in value, the CMHC would also experience a loss.

The timing for the launch is interesting, given Canadians head to the polls on Oct. 21.

One can’t help but note that this incentive comes across as a little tone deaf given the current affects of the stress test.

Is this new incentive just a distraction to the bigger issues first-time homebuyers are facing? Well, time will tell.

Till then, we sit and wait.

IF YOU ENJOYED THIS ARTICLE, SUBSCRIBE TO OUR NEWSLETTER

Of course you can unsubscribe at any time

More News & Inspiration