Are you a first time home buyer? If you haven’t yet heard about the new incentive that the Government of Canada is going to be available September 1, 2019 we are going to give you some of our thoughts.
First, what is the program? This program is made to help those who don’t have their full downpayment, to assist them in home ownership. For a resale home – a home that has been lived in and is on the market through either private sale or MLS through a Realtor they will give you up to 5%. If you are wanting to build a home you will get from 5-10%. Of course, you must qualify for the program the total combined household income must not be more than $120,000 so if you and your significant other make more than that combined this program will not work for you. You must also be a first time home buyer (or haven’t bought a home in the last 4 years), permanent or non permanent residence (who are legally authorized to work in Canada) can all apply.
The other catch is the home can not exceed $480,000 so any homes over that amount will also not apply if you are wanting to buy a bigger home. However, this program is targeted towards first time home buyers and in Edmonton we find most first time home buyers spend anywhere from $300-$450 for their first home so this covers that.
My thoughts: political play maybe? With the election coming up so quickly, it is hard not to wonder if this may be a play to get votes from the younger generation that has been having difficulty buying a home because of the inability to save up for a downpayment. There are many reasons one cannot save up enough money for a downpayment, for one the house prices in some cities across Canada have become very unattainable in price. These homes wouldn’t qualify for this program anyways. But there are other issues at hand where one cannot save, cost of living has gone up – do you realize that the raise in minimum wage in Alberta has caused the cost of living to go higher? Going out to eat, shopping for groceries, eating in general which we all need to do has driven the cost of living higher – which then impedes from saving. My concern on lending money when you didn’t have the ability to save it is, does that put potential home buyers in a financially stretched place? Well if you are paying rent that is equivalent to what a mortgage payment would be then this would be safe and a great option for you. If you are paying a lot less in rent and can barely make ends meet this may be something to stay away from.
Don’t forget you still have to pay the money back, the Government is not in the business giving money way. You have up to 25 years to pay back or when you sell the home which ever would be sooner. Obviously, selling your home likely will happen before 25 years as most first time home buyers buy starter homes and end up upgrading when their family grows. So details on how you pay back? If you sell your home and your home grew in value which it will over time (I know, hard to believe since home values have been dropping for the last 4 years, but clearly the Government of Canada knows that pricing won’t go that much lower) or even if you don’t sell but want to pay back before you sell, the amount you owe is based on fair market value at the time you pay back and if you utilized the 10% incentive, you would owe 10% of the fair market value. So you see, they still get their money back and then some.
What are your thoughts on this program? I think if used correctly it could be a great program, but if people use this that shouldn’t you will have bigger problems on your hands and having potentially mortgages that go into foreclosure if not utilized correctly. Regardless, when the program is implemented and people take advantage of this, I do believe it will cause demand to go up and prices will go “up” not in a huge way but I do think it will create more sales which our market desperately needs. We need to start seeing prices flatline instead of dropping and I believe this could help push buyers to buy even if you aren’t using the program because now there will be more buyers in the market to buy causing less inventory ideally. If we can get back to a balanced market vs the buyers market we’ve been in this will help our economy as a whole as well.
But again, this is another “Government” induced change to the market so we will see what results will happen for the last quarter of the year. What are your thoughts? Will you be utilizing this program? Have more questions?
Contact myself at 780-945-7821 or firstname.lastname@example.org and I would be happy to talk to you about this program more and if it would be a good idea for your to use it or not. If you have questions about the market in general or anything real estate related, let’s talk!