Pattie Lovett-Reid: What the parties promise to first-time buyers
TORONTO – Potential buyers are frustrated. Among their complaints: Too little housing, too high prices, too much demand and not enough supply.
Many first-time buyers have struggled to get a down payment, secure a sustainable income to support ongoing payments, and ultimately qualify for a home that not only meets their needs but also their wants. .
This is clearly a portfolio issue that has garnered a lot of attention, with politicians focusing on ways that may well make the dream of owning a home easier.
Here are some of the platform issues that could influence your vote, depending on your personal financial situation.
The Liberals continue to promote their first-time home buyer incentive program. There aren’t many changes here, as participants still need to provide a minimum deposit.
While the program offers some benefits to those looking to enter the market – you have a shared stake with the government that is touted as uninteresting – there is still a cost based on the appreciation of the home. , which could actually be higher than the borrowing rate.
As James Laird, co-founder of Ratehub.ca and president of mortgage brokerage firm CanWise Financial, told me in an email, âFirst-time homebuyers struggle with two things: saving the down payment and qualify for a mortgage that is large enough to purchase the First-Time Home Buyer Incentive Program always requires the borrower to make the minimum down payment and in effect reduces the purchase price at which a person can be eligible for about 6%.
To solve the problem of lack of supply, the Liberals proposed a national tax on vacant residential properties owned by non-Canadians who do not live in Canada. The policy would also ensure that properties owned by foreigners are available for rent.
Meanwhile, the Conservative Party is targeting those with good credit and good incomes, but who continue to struggle to whip up a 20% down payment on homes over $ 1 million. The goal here is to increase mortgage insurance eligibility and then index it to home price inflation.
They also seek to remove the stress test of mortgage renewals, allowing homeowners to shop around for better rates without having to requalify for a mortgage. In addition, if elected, they will provide longer term mortgages of seven to ten years, which will translate into a little more stability for homeowners and the industry. in general.
The Conservatives are also focusing on foreign investors, saying they will ban the purchase of a home to those who do not live or plan to move to Canada, for a period of two years. Also, tackling the supply side of the equation, they have pledged to build a million homes over the next three years.
Once popular, 30-year amortization for insured mortgages is back on the New Democratic Party table.
Canadians who deposit less than 20% will have the option of increasing depreciation from 25% to 30%. This would allow first-time homebuyers to qualify for an approximately 10% higher purchase price without increasing their monthly mortgage payments.
The benefit of a 30-year amortization is that it helps keep payments more manageable, while also providing a little more time to pay it off.
The NDP is also focusing on increasing supply, saying it will create 500,000 affordable homes over the next 10 years. They also target foreign buyers, with a 20% tax on foreign buyers aimed at slowing demand and ultimately lowering prices.
There is a lot to unpack here. In the end, what policy issues will really move the lines when it comes to affordability?
Here’s what Laird had to say: âThere are two policies that would really make a difference for first-time homebuyers in the next election, which allow a 30-year amortization period when people pay less than 20 years. percent (proposed by the NDP) and increasing the value of the home eligible for mortgage insurance, which therefore allows the buyer to put less than 20% down payment (proposed by the Conservatives). Both of these policies are important and would help more young Canadians buy their first homes. The first-time home buyer incentive enhancement (proposed by the Liberals) is a flawed policy and therefore unnecessary.
On September 20, you have the opportunity to decide which policies meet your financial needs and those of your family.