I thought I'd take a minute talk about the recent budget changes aimed at helping first time home buyers. Bear in mind that what I write here is my opinion on topics, and in every case it's worth the conversation!
Let me start with this: Any change aimed at helping home buyers, especially first time home buyers, is a good change. Let's start with a "glass half full" perspective! Could the government have done more, or even other things that would have a bigger impact? Probably. But let's take what we were given and see what we can do with it.
They made really two key announcements, one of which has already taken effect, another that won't be fully fleshed out until the fall, so it's important to reserve judgement on it until we know all the details, but we'll look at what we know.
Let's start with one we can use now: The change to First Time Home Buyer RRSP withdrawal plan. It used to be that, as a first time buyer you could take up to $25,000 from your RRSP, tax free, to use for down payment and closing costs. Now you can withdraw up to $35,000. So, the positive in this is, of course, an extra ten grand can go a long way to helping lower your costs and/or payments. But bear in mind that you do need to repay whatever you take out within 15 years, with yearly payments. So while you've now taken on a mortgage, you'll also have the RRSP payment as well. (Or, if you don't pay it back, you'll be taxed on the yearly amount as taxable income). I also wonder how many first time home buyers will have $35,000 already saved. But if you do, this MAY be something you can look at. There is a second part to this plan that won't be launched until 2020, and that is that when spouses separate/divorce, they will be able to access this plan as well. Again, not a huge share of the market, but if it can help even a few people make it work, it's a good thing!
The second announcement, which won't be fully launched until this fall, at the earliest, and the one with many more unknowns, is the CMHC "down payment assistance" option. IF you qualify, CMHC will now offer an additional 5% (on preexisting homes) or 10% (on new builds) as an interest free loan to add to your down payment. Again, this is aimed at keeping your monthly payments a little lower, and help with cash flow. You do still have to qualify for a mortgage on your own first (which means having the minimum 5% down yourself), and there are other rules: Household income can not exceed $120,000 a year, and the purchase price will be capped, at either 4 times your income, or a max of around a half million. Again, this sounds like a positive thing. And it COULD be. BUT this isn't free money! The loan will need to be repaid, upon the sale of the home. And some of the unknowns are whether or not they will also "take" some of the equity you've made over and above the original loan. Will you be "allowed" to refinance your home at any point to use the equity? What if, due to unforeseen circumstances, you take a loss on the sale? These are only a few of the many questions that still need to be answered on this program.
Both of these changes have the potential to help some people. I personally don't feel it will have as big an impact as the government claims it will, and each option also comes with it's own strings and challenges, and won't be right for everyone. Both are certainly worth talking about when the time comes to do your mortgage, and I will be happy to make them a part of my conversation with you, but I don't recommend getting overly excited about them and just diving in without doing the due diligence first, and that's what I'm here to help you with!
And the last thing I'll touch on in this already long winded post, is the question of whether or not you should consider waiting until the fall to see what this all might mean? My short answer is "No". If you're not going to be ready until then anyway, that's different. But if you were thinking of getting started now, and are in a position to do so, I don't believe this will be worth waiting for. Especially if you're renting, it's an extra several months of rent payments for a "what if". But if your'e still not sure what you should do, let's have the conversation, because there will never be a "one size fits all" answer, we'll need to look at your numbers, and your individual situation, and we'll make sure we do what's right for you! So, as always, I'm here to answer all your mortgage related questions! Thanks for taking the time to read this, I hope you found it informative and helpful!
