Richard & Liz Bergeron

Calgary’s Real Estate Specialists

Richard's Cell: 403-819-2331 | Liz's Cell: 403-875-8470

Government Releases More Details on First Time Home Buyers Incentive.

1.       This program is for first time buyer, owner occupied, insured purchases only. (speak with your mortgage agent about the definition of First Time Buyer.)

2.       The program will be accepting applications after September 02, 2019

3.       First possessions must be after November 01, 2019

4.      Maximum household qualifying income is $120,000 per year.

5.        Maximum first mortgage and buyer incentive is 4 times annual income, maxed out at $480,000.

6.      The Government Incentive is protected by a Shared Equity Mortgage ( SEM ) registered in second position on title.

7.       SEM is 5 % of the purchase price for existing homes and mobiles

8.      SEM is 10% of the purchase price for new construction homes.

9.      The first mortgage must be more the 80% loan to value and insured by one of our three mortgage insurance companies

10.   No payments are required for the SEM.

11.    SEM must be repaid upon sale or within 25 years.

12.    SEM can be paid out early without penalty.

13.    When the SEM is paid out the government is repaid 5% or 10% of the gross sale price or the deemed fair market value if paid out early.

14.   Legal fees to register, or discharge or appraisals are to the cost of the homebuyer.

15.    Minimum 5 % down payment is still required or sliding scale if purchase price creeps above $500,000.

16.   Only Traditional down payment soruces is accepted.

17.    Applicants will be approved by the mortgage insurance companies.

Benefits:

·        Home buyer’s immediate monthly ownership costs are reduced by the Principal and Interest on the SEM amount. (say a couple hundred dollars).  That has value.

Concerns:

·       The Home buyer has the Government as an equity partner with a second mortgage registered on title. Creates lots of issues down the road for refinancing, getting a Line of Credit, buying out a spouse, selling to a family member, arguing with the government about what your house is worth.

·       Using this program, home buyers qualify for a slightly smaller purchase price than if they do not use it.

·       If the home buyer puts money into home improvements prior to repaying the SEM, the increase in value from the improvements, when they sell or refinance, is shared with the government. Because repayment is based upon gross sale price, they will be paying a 5 or 10% tax on their home improvements expenditures.

The government has been conducting training sessions for industry members and providing additional information. We are happy to share this if you are interested. Contact your Jencor Representative for more information.

PS: Interest rates:

On another issue, long term sovereign debt has been offering decreasing yields the last few months and showing a sharp decrease the last two weeks. Many European and Asian countries continue to have a negative yield on their bonds. Investors have to pay a premium to buy a long-term interest bearing bond. The investor does not get a return. For example, a 6% cost on a 20 year German bond yesterday.

Our 5 year mortgage rates are going down, not as sharply, you still have to pay interest on a mortgage, but some of that worldwide decline is showing up in lower mortgage rates.

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