New first-time homebuyer incentive plan criticized by members of housing industry
The federal government unveiled details of its long-awaited plan to help first-time homebuyers on Monday, but already some in the industry say it may not be enough to help those looking to buy their first home in Canada’s hottest real estate markets.
The Minister of Families, Children and Social Development Jean-Yves Duclos says the program will help Canada's middle class and save new homeowners hundreds of dollars a month on their mortgages.
"This program will help almost 100 thousand homebuyers achieve their dream of home ownership,” Duclos said. “It's a form of a shared equity mortgage with the government of Canada."
To qualify for the program, the first-time buyer must have a household income of less than $120,000 annually. The Canada Mortgage and Housing Corporation will contribute up to five per cent on a resale home and up to 10 per cent on new one. It will be considered an interest-free loan that must be paid back within 25 years or when the home is sold.
But some in the industry feel the program could do much more to help struggling first time buyers.
There is a requirement the total value of the mortgage cannot be more than $480,000. With the down payment, that means the maximum of value of a home would be $565,000. The program could benefit first-time homebuyers in smaller communities where homes cost less.
But homes in the greater Toronto area are difficult to find in that price range.
“It really doesn't bridge the gap between high home prices and what home buyers, (especially) young home buyers can afford,” said Rob McLister, a spokesperson with the mortgage rate comparison website RateSpy.com.
James Laird of Ratehub agreed, saying that many first-time homebuyers might be better off not taking part in the program.
“I really don't see many first-time homebuyers choosing to have a co-ownership agreement with the government,” Laird said. “It's a fairly unattractive proposal."
If a homebuyer borrows money from the government and the value of the home goes up, they will have to pay back more money.
However, the government says homebuyers will also pay less if there is a housing downturn and the home drops in value.
The federal government will accept applications starting Sept. 2, which is a month before the next federal election.