How do I know how much I have to pay back?
- You receive a 5% incentive of the home’s purchase price of $200,000, or $10,000. If your home value increases to $300,000 your payback would be 5% of the current value or $15,000.
- You receive a 10% incentive of the home’s purchase price of $200,000, or $20,000 and your home value decreases to $150,000, your repayment value will be 10% of the current value or $15,000.
You can repay the Incentive at any time without a pre-payment penalty. You have to repay the Incentive after 25 years or if the property is sold. The repayment of the Incentive is based on the property’s fair market value:
NOTE: If your property value goes down, you are still responsible for repaying the shared equity mortgage based on the current home value at time of repayment.
@GarthTurner says First, the 5% Justin-mortgage-helper limits the borrowed amount to four times the income of the borrower ($120,000 or less), which is less than the banks now offer every day. The formula also limits the purchase price to around $500,000, which buys a nice garage in Kits. But the worst aspect of this plan is the pay-back.
Once a borrower signs on for a shared-equity mortgage they’re obligated to share any gain with the feds after 25 years, or when the property’s sold. Since the purchase price is low, odds are the kids are buying fixer-uppers and will pour a lot of extra cash into renos over the next few years. Add in any market appreciation, and you can see the problem. A 5% helping hand on the original low purchase price can turn into a big cheque to Ottawa upon the sale a decade or two later – coming right out of the tax-free principal residence capital gains exemption.
Now, why would anyone sign on for that? And yet will federal advertising for this program?