The federal Liberals say a new program to help new home buyers pay for their first place will kick in on Labour Day just before the October federal election.
Under the plan, the government would help some first-time buyers by advancing an interest-free loan of up to five per cent of the purchase price of an existing home, and up to 10 per cent of the cost of a new home. This would allow the home buyers to take out a smaller mortgage and keep their monthly payments lower.
Specifics Known Now…
The government’s plan will see it pick up five per cent of a mortgage on existing homes for households that earn under $120,000 a year, on a mortgage of no more than $480,000.
It plans to cover up to 10 per cent to spur construction for new homes.
There isn’t any interest on the federal money.
A buyer will have to repay it if they sell their house, or after 25 years of living in the home.
The government has allocated $1.25 billion over three years for the First-Time Home Buyer Incentive.
After the budget was announced, TD economists estimated the new mortgage incentive could actually help push up home sales and prices by between two and five per cent by 2020. But their calculation also included the expected effect of another budget measure that would allow first-time home buyers to use up to $35,000 — rather than $25,000 — of their funds held in a registered retirement savings plan (RRSP) for a home purchase without tax consequences.
Critics say this program will not do much to help buyers in Vancouver and Toronto, where average home prices sit at $925,000 and $765,000, respectively. But the government is confident it will help home buyers even in Canada’s biggest cities.
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