So some of you may have heard the news last week about the new CMHC First-Time Home Buyer Incentive apparently set to help first-time home buyers purchase their first home. The general gist of the plan is that eligible Canadians (those who do not have 20% down payment and applying for insured mortgages) may be able to make their first purchase with only 5% down payment while receiving an incentive of up to 10% of the home price, effectively lowering the mortgage amount. The 10% would be for buyers purchasing newly built homes and 5% for existing homes. Also, another requirement to qualify is that the annual income must be under $120,000. This sounds like a pretty huge announcement especially in Toronto and in Vancouver where house prices have gone up dramatically due to short supply.
In my opinion, the pros to this program is the obvious help it would be for buyers that want to get out of renting and enter the buying market sooner. I think that this would start a ripple effect in the market starting from smaller condos which allows sellers of existing condos to upsize. By meeting the demands of first-time home buyers, the market would get to a point where supply dwindles and prices could see further increases. This increase could easily spill into larger condos or townhouses.
Now for cons, it's important to remember that the incentive money is not free cash and has to be repaid. The exact method of repayment is still unknown (correct me if I'm wrong here please). Another huge con I see is the huge figure of $1.25 BILLION over three years that's dedicated to this program. Sure it does help many first-time home buyers but this amount coming from the federal government budget probably means the rest of the Canadians who won't be eligible for this program may have to pay for it in some fashion.
What do you guys think? Feel free to leave me some feedback!
Here's an article for further reading: