Can You Benefit From This New Down Payment Program?

from Michael Ireland Real Estate Podcast · host Michael Ireland

If you’re worried about coming up with a down payment for a new home, this new down payment assistance program might be the answer.  Today I want to talk to about the new program that matches dollar for dollar what a first-time home buyer can come up with as a down payment.  This program began the 16th of January and will end in March 2020. So how do you qualify?  You must have a maximum household income of $150,000, be a Canadian resident, and to qualify under the bank’s five-year rate of lending. Also, you must have the money on account. In other words, it cannot be a gift from your parents that is then matched by the government. This loan will require the buyer to accept a second mortgage registered on their property. This means even though it’s 0% interest for five years, five years from now that buyer will have an additional payment running alongside of their mortgage.  Experts are concerned this will impact a buyer’s ability to hold onto their home. We may see a lot of buyers selling their properties when that second payment kicks in.  Additionally, the purchase price has to be 80% loan-to-value ratio, which means buyers qualifying for the program will need to have CMHC or mortgage underwriting insurance, which can run from 2% to 3.5% of the purchase price. It will create a premium for some buyers in order to jump into the market with this program.   The government has intervened and created a stimulus, bringing future buyers into the market today. This creates a bump in demand, but it ultimately depresses the market in the long term because those buyers are no longer there.  So who are the winners in this program?  Banks, underwriters, and buyers who can qualify will benefit from this program. Any property up to $750,000 will experience a really strong demand, which is good for developers and Realtors.  Qualified buyers will benefit greatly from this program. If you have any questions about this program please feel free to give me a call or send me an email. I look forward to hearing from you! 

What this episode covers

If you’re worried about coming up with a down payment for a new home, this new down payment assistance program might be the answer. Today I want to talk to about the new program that matches dollar for dollar what a first-time home buyer can come up with as a down payment. This program began the 16th of January and will end in March 2020. So how do you qualify? You must have a maximum household income of $150,000, be a Canadian resident, and to qualify under the bank’s five-year rate of lending. Also, you must have the money on account. In other words, it cannot be a gift from your parents that is then matched by the government. This loan will require the buyer to accept a second mortgage registered on their property. This means even though it’s 0% interest for five years, five years from now that buyer will have an additional payment running alongside of their mortgage. Experts are concerned this will impact a buyer’s ability to hold onto their home. We may see a lot of buyers selling their properties when that second payment kicks in. Additionally, the purchase price has to be 80% loan-to-value ratio, which means buyers qualifying for the program will need to have CMHC or mortgage underwriting insurance, which can run from 2% to 3.5% of the purchase price. It will create a premium for some buyers in order to jump into the market with this program. The government has intervened and created a stimulus, bringing future buyers into the market today. This creates a bump in demand, but it ultimately depresses the market in the long term because those buyers are no longer there. So who are the winners in this program? Banks, underwriters, and buyers who can qualify will benefit from this program. Any property up to $750,000 will experience a really strong demand, which is good for developers and Realtors. Qualified buyers will benefit greatly from this program. If you have any questions about this program please feel free to give me a call or send me an email. I look forward to hearing from you!