The federal election is coming up this fall, which means the party in power is pulling all the stops in hopes of re-election. The proposed 2019 Liberal budget was released, and with it a couple of highlights for first-time home buyers.

The budget proposes to increase the borrowing limit of the Home Buyers Plan (HBP). This plan currently allows first-time home buyers to borrow up to $25,000 to purchase a home. The budget proposes to increase that limit to $35,000. The other tidbit for potential home buyers is better described as a “shared equity mortgage.”

CHMC First-Time Home Buyer Incentive

This program would give home buyers access to additional funds to be put toward the cost of buying their first home and paid back later. (The details on when this repayment will take place are unclear, as is the amount that will be due.) According to the 2019 proposed budget, first-time home buyers would provide their own initial 5% down payment and then the Canada Home and Mortgage Cooperation (CMHC) would provide an additional 5% (for resale homes) or 10% (for new builds.) Take a look at the example provided in the budget.

According to this example the home buyer, Anita, came up with her own 5% down payment and then the CMHC pitched in an additional 10%. This decreased Anita’s monthly mortgage payment by $228. This savings may be just what Anita needs in order to fit a mortgage into her budget, or it may be extra cash she can now throw back into her mortgage, put into an investment, save for a rainy day, or use on something fun. The decision is hers.

Lower borrowing limit

James Laird, president of CanWise Financial says, The current qualifying criteria, including the stress test, allows a household to qualify for a house that is 4.5-4.7 times their household income.” In comparison, the proposed CMHC Incentive program would be limited to households that make $120,000 a year or less, and would cap the insured mortgage and incentive amount at 4 times a participant’s annual household income. For example, a household making $120,000 annually could presently qualify for a property with a max purchase price of $564,000. But within the theoretical incentive program the same household could only qualify for a property with a max purchase price of $480,000. That’s a 15% difference.

The final details on this incentive program will come available some time after the election this fall if the current party in power is re-elected. In the mean time, feel free to take our quick mortgage pre-approval application to find out how much you could be qualified to borrow for your first (or next) home!

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