19 March 2019

The CMHC is ready to contribute this amount in exchange for a corresponding equity stake in the home. As a result, the size of homeowners’ mortgages will go down, although they will have to pay for it.

All the details on how the system will work will be presented this fall, but now the government says that if a first-time buyer wants to purchase a property for $400,000, they’d have to provide a $20,000 down payment.

Usually, the rest of the sum ($380,000) will be provided in the form of a loan, but the new program suggests CMHC should kick in $40,000 in exchange for a 10%.

It means the buyer’s mortgage will go down to $340,000. In case of a standard mortgage with a 3.5% rate, it’s the same as monthly payments $200 lower than it would have been for the 25-year life of the loan.

The deal is that the buyer will have to return the CMHC’s stake in the property in the future. They don’t have to do it until the property is resold or earlier in case they want it.

The budget doesn’t say today how much the buyer would owe: is it the same amount the CMHC provides at once, or is it the new house value increased in time?

According to the government, the details will be released in the coming months. Craig Alexander, chief economist at Deloitte, says it’s a good idea.

“Don’t forget that the government doesn’t take measures which could lead to growing prices,” – he noted, adding that the plan may help more Canadians become homeowners.

The government says the plan could lead to 100,000 new first time buyers during the next three years.

However, it’s not the only housing related issue of the budget.

In addition to it, the government will raise the maximum amount that a first-time buyer can withdraw from an RRSP, without penalty: from $25,000 to $35,000. Moreover, Ottawa will edit the RRSP withdrawal rules in order to help people who are facing family crises.

From now on, Canadians who are dealing with their marriages or common law partnerships divorce, will be still able to use the Home Buyer’s Plan, even if they don’t meet the technical requirement of a first-time buyer.

Another announcement concerns renters. The government plans to expand the program launched in 2017 to finance construction of rental units with low-cost loans. In 2018, it added 14,000 more new units into the program of the Rental Construction Financing Initiative. This year, the budget adds 9 years of funding to the program.

For $10 billion, the government will add 42,500 new rental units to Canada’s housing stock by 2028. It also hits the financial crime in the real estate sector.

Recent increases to the budgets of tax agencies have found $100 million in tax avoidance from home sales, and this result made the government keep working on it.

Ottawa will give the Canada Revenue Agency another $50 million for 5 years to search for cases of tax avoidance in the following issues: reporting the sale of a primary residence, paying taxes from the sale of a second property, reporting gains from real estate ‘flipping’, reporting commissions on home sales, builders charging GST or HST on new home sales.

According to the government, it will lead to $68 million of revenue during the next 5 years.