25 Apr

Should a buyer wait until the fall because of the new Shared Equity Program from CMHC?

General

Posted by: Maria Solverson

In the March Federal Budget, the government introduced a few changes that impact the housing and mortgage markets. One of the changes, a Shared Equity Participation Mortgage with CMHC as a partner with the homeowner will not be implemented until the fall. At this time, we do not know the full details of the program. We have had some clients wonder if they should wait until the fall to buy a house.

What we do know;

  • Maximum family income of $120,000.
  • Maximum mortgage is 4 times the income.
  • Maximum shared equity loan 5% for existing houses.
  • Maximum shared equity loan 10% for new homes.
  • Must be an insured mortgage.  ( we think )
  • We know that 4 times income is a smaller amount than what home buyers qualify for under current rules.

What we do not know;

  • What will be the terms of the Shared Equity Mortgage with CMHC?  Will the homeowner be able to renovate their home without government approval? Will the homeowner be able to refinance the mortgage without government approval? What happens if the homeowner misses a payment?  When the home is sold, what are the terms of repayment? If there is a spousal break up, what happens with the responsibility for the shared mortgage? Will the government have a claim against the profits if there are any?  How will the CMHC Premium be calculated? Who pays the extra cost of registering the Equity Mortgage?

What we can guess;

  • Depending upon the purchase price, and whether there is no interest and no equity claw back and whether the home is an existing home or a new home, the home-buyer could save approximately $500 to $700 per year on an existing home and perhaps double that on a new home. A claw back would sure take the fun out of it. The government telling you how to manage your equity would also take the fun out of it.
  • Five year fixed interest rates have taken a dip this spring from rates available late last year. We can guess this is a spring dip and not a long-term trend, so rates may well be higher in the fall.

Is it reasonable to put off a purchase, hoping the program does not have too many warts, hoping that interest rates will remain low, hoping the house that is currently available and a current bargain is still on the market at the same good price in the fall?

Calgary homes are currently on sale. We suggest if you or your buyers find the ideal home, and it is at a good price and the payments fit the budget, buy now. Do not wait for a program that may or may not be helpful.

Take advantage of a sale when it is happening.

For some more reading on this please see this article from Dr. Sherry Cooper.

Croft Axsen – Jencor Mortgage