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Today, March 19, 2019, the Trudeau government released the latest federal budget. What does it mean for Toronto home Buyers and Sellers? We asked one of our favourite mortgage brokers, Mortgage Jake, to comment…
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Wow. Sheesh. Ugh. Don’t know what to say other than…. what a waste.
I rush home to hear the budget today at 4pm sharp, and of course, it’s released a little bit before so tidbits of info get released in the media. I wait for the good stuff, there I see Bill Morneau sitting and smiling, talking about helping Canadians and I wait with my breath held until he releases the platform of HOW he’ll help buyers.
And then, I hear the sound of a balloon losing air. Kind of like this.
So what did they announce that’ll help first-time buyers*?
- The RRSP limit will be increased to $35,000.
- There is now a SHARED EQUITY program with CMHC where the Government will help with your down payment by giving you a “free” loan.
#1 is easy to understand.
#2 will be less easy to understand so let me explain with some caveats.
First, we don’t know (yet) what “first time buyer” means exactly, because there are a myriad of definitions for who qualifies as a first-time buyer – so let’s see how they (Government) defines it.
What we do know is, the Government will lend you 5% if you’re buying a resale home and 10% if you’re buying a new construction (to spur on the supply side) and will not ask for any payments on this loan until you sell the property. If you’ve lost money, so did they. If you’ve made money, they’ll take an equal portion of this (details TBA).
A sample property that’s $500,000 would mean:
- you bring 5% or $25,000
- they bring $5% or $25,000
- your down payment is now $50,000
- your monthly payments under this example would drop from $2,235 to $2,118.
There will be some limits placed:
- definition of first-time buyer?
- $120,000 max household salary/income
- max 4x income to debt ratio
SO if you whip out your calculator (or, iphone with the calculator), you’ll quickly figure out this will NOT help the Toronto market at all, whatsoever, zero, zilch.
$120,000 times 4 = $480,000 max mortgage. Please show me a property I can buy today in Toronto that’s $533,333 or less (or, $533,000 at 90% = $480,000)? Very, very, very hard.
The government could have:
- increased amortization to 30 years from 25 – didn’t.
- increased the CMHC cap from $1M in Toronto – didn’t.
- change the stress test (we kind of knew they wouldn’t and they didn’t)
Want to know how I would define these changes? Like this photo:
Does this car LOOK like it’ll go faster because of those stickers? Yes.
Will it? Heck no!
To sum up, I am disappointed. Disappointed more in myself because I truly believed our Government would have wanted to do some more, and disappointed in the Government for taking what was very easy, and making it way too complicated and needless.
This will do nothing for Toronto’s housing market. It won’t decrease prices, that’s for sure. It may help the outlying regions close to Toronto (Hamilton, Guelph, Waterloo, Windsor, etc. I’m lookin’ at you!).
Questions? You can email me here.
Jake
