Mortgage Broker

8 | spring 2019 cmba-achc.ca CMB MAGAZINE editorialsummary Enough with the Band-aids $600,000 House sale price $ 30,000 5% shared equity owing to CMHC $316,917 balance of mortgage after 5 years, no penalty $253,083 equity to owner For the right first-time home buyer, in the right market, this program might provide some tangible assistance. CMHC estimates that it will help 100,000 first-time home buyers over three years. Of course, in expensive markets like British Columbia's Lower Mainland, where the average cost of a condo exceeds $650,000, it is expected that few prospective homeowners will be able to take advantage of it. Certainly, government down payment assistance programs are far from novel. e B.C. government had anticipated that 100,000 first-time buyers would be able to take advantage of its now defunct second mortgage program, introduced in 2017. However, the program was suspended just one year later, as only 3,000 home buyers had participated. Qualifying for the program was by all accounts a complex, awkward process, which took a relatively hey government bureaucracy to administer. With luck, the CMHC program will be more streamlined when it is deployed later this year. PART OF A PATTERN So far, we have witnessed the provincial and federal governments deploying piecemeal strategies to improve both the housing supply and homeowner affordability. is includes the introduction of taxes on foreign ownership, high-priced homes and vacation properties. It now also includes some new federal measures, such as the shared home equity plan. However, we have yet to see this translate into any true success on the housing affordability front, particularly in Canada's urban centres. Soening home prices in what are now considered to be M arch ushered in a new federal budget, which included a few new housing-related measures. Most you will have already heard of the new shared equity program for first-time home buyers, which will be administered by Canada Mortgage and Housing Corp. e incentive enables home buyers to reduce the amount of money required for an insured mortgage without increasing the amount they must save for a down payment. It is a shared equity model. e rationale behind it is to enable eligible first-time home buyers to lower their borrowing costs as CMHC would own a share of the equity in the home. Repayment to CMHC for its stake in the home would be made at the time it is sold. Here is an example of how the shared equity model works, provided by the Department of Finance: $400,000 House purchase price $ 20,000 5% down payment from purchaser $ 20,000 5% shared equity from CMHC $360,000 size of first mortgage Of course, CMHC fees are still charged, bumping up the first mortgage to approximately $372,000. If we hypothetically assume that the owners want to sell five years later, and we also assume prices have jumped to the point where this property sells for $600,000, then the numbers should look like this: While our governments enact piecemeal solutions to the housing affordability problem, long-term vision is hard to find BY SAMANTHA GALE

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