“Over these past few years we heard from Canadians who talked about their concerns about being able to own their own home. We believe in investing in people and communities, which is why we are taking real, concrete steps to make sure home ownership remains an achievable dream, not a privilege afforded to only the richest few.”
—The Rt. Hon. Justin Trudeau, Prime Minister of Canada
In Trudeau’s new budget he announced a 2 prong approach to helping new buyers enter into home ownership.
The first approach would see first time home buyers receive an incentive of up to 10% of the price of a new home. Under this approach, administered by CMHC, buyers would still need to come up with a 5% down payment. To qualify, the buyers’ total income would need to be below $120,000/year with a maximum credit extended of up to 4 times the annual income, or up to 480,000.
This would mean that a purchase of a home of $400,000 with a 5% ($20,000) down payment, could receive an incentive of up to $40,000, bringing the mortgage from $380,000 to $340,000. In terms of monthly payments, assuming a 25 year amortization and a mortgage rate of 3.5% the monthly payment would go from $1970 to $1750.
Buyers hoping to purchase a resale home would be entitled to a 5% initiative. In either case, the incentive would need to be repaid, however, those details are not clear as of yet.
The second approach is an increase in the amount that buyers can borrow from their RSP, which has been increased from $25,000 to $35,000.
What will this mean for Muskoka? With millennial’s priced out of the bigger cities, the trend has increasingly been for millennial’s to invest in properties in Muskoka. Will there be an increase in millennial’s purchasing here? Will this new incentive drive Muskoka property costs up?
For more on Trudeau’s announcement see: https://pm.gc.ca/eng/news/2019/03/20/new-program-help-100000-canadian-families-buy-their-first-home