First-Time
The Canada Mortgage and Housing Corporation (CMHC) has ended the First-Time Home Buyer Incentive (FTHBI), according to a statement on its website.
The Canadian Mortgage Mortgage Corporation (CMHC) has announced a deadline for new or updated FTHBI submissions, with applications submitted after this date subject to manual review. Requests for manual reviews must be submitted by March 25, and no new approvals will be granted after March 31. The program was criticized for its restrictive nature, primarily around maximum allowable income levels and property values, which was not ideal in locations where the average purchase price exceeded this threshold. DV Capital’s principal broker, Daniel Vyner, said that the program’s performance did not meet its target, leaving a less consumer-driven product designed to help Canadians enter the housing market.
According to information from the federal government’s National Housing Strategy website, the initiative had a budget of up to $1.25 billion, with around $408.92 million being used. The program aimed to help up to 100,000 homeowners, and about 22,826 participated in the project.
The Canadian Mortgage Mortgage Corporation (CMHC) has extended the First Home Savings Account (FHSA) program, which was previously expected to expire in the 2021-22 fiscal year, to 2022. The program, which had a budget of up to $1.25 billion, aimed to assist up to 100,000 homebuyers, with 22,826 participating. The CMHC spokesperson stated that the FHSA was deemed a better tool to help first-time homebuyers buy a home after a review of federal housing plans.
Over 500,000 Canadians are currently using an FHSA account, and refocusing funding will allow the government to focus on other impactful policy areas. However, James Laird, co-CEO of Ratehub.ca and president of CanWise mortgage lender, criticized the policy for significant flaws and suggested that allowing consumers to amortize their mortgage over 30 years would be an effective replacement.
The Canadian government launched the FTHBI in September 2019 to lower monthly mortgage payments for new homeowners without increasing their down payment costs. The incentive offered qualifying home buyers an interest-free loan of between five and 10% in exchange for the government sharing in the home’s equity. The purpose was to boost down payments, resulting in smaller mortgage payments. The buyer would need to repay their FTHBI loan and additional equity percentage when selling the home or at the 25-year ownership mark.
However, the FTHBI struggled to find its footing within the Canadian real estate market and was perceived as too limiting for homebuyers in larger cities. To qualify, buyers had to have annual incomes of $120,000 or less, with the combined incentive and mortgage capped at four times the buyer’s income. The program could only be used for insured mortgages with a purchase price of under $1 million.
Government-Sponsored Homeownership Opportunities
The government’s incentive program for first-time home buyers has been criticized for its lack of appeal to many people, according to a spokesperson for NerdWallet Canada. The government would benefit from an appreciating home value without paying for maintenance like property taxes or insurance. The program also requires borrowers to have enough money for a minimum down payment, which reduces the purchase price someone can qualify for by about six per cent.
Additionally, the incentive must be repaid in 25 years or if the property is sold, raising uncertainty if a homeowner stays in the property for 25 years or longer. NerdWallet Canada spokesperson, Clay Jarvis, said the program was unlikely to appeal to many people due to the shared equity agreement with the federal government. Jarvis emphasized the importance of finding ways to help first-time home buyers afford what is available, as Canada is never going to build enough homes to keep up with demand.
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