Medicine Hat, AB - When the federal budget was announced in March, a program designed for first time home buyers caught the eye of many.
Now as the government begins to release more details, many experts are becoming weary that this is actually the right program.
The federal government announced that they will be launching the interest free loan program on September 2nd .
It’s available for first-time buyers with a household income of no more than $120,000 and will see the Canada Mortgage and Housing Corp actually ‘buy a share’ of the home, in order to reduce the amount owing and monthly payments.
Another requirement is that the total value of the mortgage plus the CMHC’s portion can’t be more than four times income.
Jayne Halladay, a mortgage broker with with Trilogy mortgage, says that the government could have done a better job with the program.
“On a blanket opinion, I don’t really like the program. I think we could have achieved more decreasing the bench market qualifying rate or extending amortization.” Halladay continues. “I don’t think this is going to help clients get into that home that they need.”
The CMHC will buy up to five per cent of an existing home or 10 per cent of a new build, and will take its share back either when the owner sells the home or in 25 years.
Halladay says that long term payment could hurt some people.
“In Medicine Hat, it covers a lot of homes. So it could help people with their cash flow, but I don’t necessarily think long term it’s going to help them since they will still have that balloon payment at the end.” She said. “It’s also important to consider if they are going to refinance in the future because it’s going to have an implication on that because they will need to pay that money back prior to refinancing.”
The amount paid back will be dependent on the value of the house when the time comes. As the value of the house goes up or down, so will the portion to be paid back to the government.
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