First Time Buyer Incentive

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.

https://www.placetocallhome.ca/fthbi/first-time-homebuyer-incentive.cfm


@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? 

ZERO Growth Forecast from TD

TD Bank issued their economic forecast in March 2013.   While most are lamenting the additional strains placed on First Time Buyers, TD rightly graphs the reduction in the number of First Time Purchasers by age group.  Immediately beside this is a graph of How many will be over the age of 65 during the next few decades.   After 2030 the Mature market will continue at 25% of the entire Canadian Population?

What does this imply?   ZERO net growth over the cost of inflation. 

Thank you to Romy Alegria with TD for providing the following details;

•  We project a 3.5% annual rate of return on real estate to prevail beyond 2015 – this is the long-run rate of increase for home prices in Canada. However, this pace will be moderately lower than they have been historically (5.4%). (for more information see attachment)
• It comes as no surprise that new home construction has started 2013 on a soft note, given the fact that housing starts ran at a pace that has largely been deemed as unsustainable in 2012. Indeed, there is strong evidence that building construction grew faster than demand for new homes in 2012. With the 6-month average of housing starts at 195,000 units, new home building is still well above the 180,000 units that are needed to keep up with household formation
• The amount of overbuilding in the Canadian housing market has been a concern for the last decade. It is estimated that the Canadian housing market is oversupplied by roughly 250,000 to 300,000 units. As such, we expect starts to continue to soften in the coming years as the new home market works off some of these excesses
• The Bank of Canada held the overnight rate unchanged at 1.00%, but had a more dovish tone in its communique, suggesting lower for longer interest rates.

Long Run Rate of Return for Canadian Home Prices 1 by David Pylyp

Romy Alegria is forming a new group in Toronto for Women's Prosperity.  Are you interested?  They even started a Facebook Group. 

Do you agree with the details in the News release?   The information in the Graphs?  Will you be downsizing or have you moved on from your parents home in the Toronto GTA.  Now its an estate sale.   Call me