CMHC Shared Equity Plan
Potential homebuyers can breathe a sigh of relief in this hot real estate market as the Canadian government has unveiled a new plan aimed at affordability. CHMC (Canada Mortgage and Housing Corporation) is a crown corporation backed by the government of Canada, which aims to help meet the needs of Canadians as they enter the housing market. CMHC backs the majority of the housing market in Canada by insuring the loans that finance the purchase price of the property.
The new CMHC plan is aimed at providing affordability to assists more middle-income Canadians fulfill their dream of owning their own home, a task which once seemed overly difficult due to sky rocketing housing prices. The CMHC First-Time Home Buyer Incentive will provide up to $1.25 billion over three years, where buyers can apply to finance between five and ten percent of their mortgage through this new shared equity ownership plan.
Buyers can apply for up to 5% of the purchase price for resale homes, or up to 10% for newly built homes that could effectively lower the mortgage payments for households making less than $120 000 a year. The amount of insured mortgage plus CMHC incentive has a cap at four times the home buyers’ annual incomes (or up to $480 000). Therefore, the most expensive homes Canadians would be able to purchase while using this incentive would be around $500 000. ($480 000 max plus down payment amount)
Homeowners will eventually have to pay back the CMHC’s equity stake in the property, but not until the owners sell the home. Earlier prepayment of this amount is possible but is not mandatory and is based solely off the homeowner’s discretion.
Coupled with the CMHC mortgage incentive program, which is set to launch in September 2019, the Canadian government will also increase the amount first-time homebuyers can withdraw from their RRSP’s (Retirement Savings Plan) towards the purchase of a home. The previous limit of $25 000 per individual has not been changed in the past 10 years despite growth in the housing market. Starting September individuals will be able to withdraw $35 000, or $70 000 per couple, from their RRSP to finance the purchase of a home without having to pay any tax on the withdrawal.
Prospective homebuyers can rejoice and tactically participate in these, as well as the many other government incentives offered, to effectively lower their housing purchase price and find their dream home whatever their price range may be.
Team Mancini would be happy to help you find the home that is right for you! Contact us today!