First-time home buyers’ incentive – follow-up
First-time home buyers’ incentive – follow-up
A couple of weeks ago, we posted a blog questioning whether or not the first-time homebuyers’ incentive offered by the Federal Government was a good, and fair program.
We began the blog by stating, “Is it really?”
The Canadian Government offers first time home buyers the possibility to borrow 5 or 10% of the purchase price of a home. They call this program a shared equity mortgage, meaning the government shares in the upside and downside of the property’s value. The borrower pays back the same percentage of the value of the home when it is sold or within a 25-year window.
Now, the federal government is reportedly planning to introduce limits on its First-Time Home Buyer Incentive (FTHBI) program to cover its downside risk.
What may have seemed like a lucrative proposition for the government over the past several years as home prices soared has become a huge liability in the face of falling valuations.
As a result, the government is reportedly now taking steps to limit its losses—and gains—to a maximum of 8% in either direction, according to a source familiar with the plans.
Wow that seems fair… the government is in when it suits it, but as the market turns, it is considering protecting itself from the potential downside.
Let’s face it, it has been an unpopular program since its inception; the FTHBI program has received underwhelming response from buyers. The three-year $1.25-billion program had only approved $270 million worth of shared-equity mortgages as of December 31, 2021, with just $253 million in funds having been paid out to first-time buyers. In other words, with just nine months remaining in the program, it had distributed just 20% of its total budget.
There are other ways to reach the same goal; putting you into a home. Want to know what these are, simply contact a mortgage broker at North East Mortgages to find out what these are.
Martin Spalding
North East Mortgages
(514) 206-0488