Starting August 1st, 30-year amortization for FTHBs for insured mortgages (less than 20%) will kick in.
If you don’t know, 30-year amortization is available for uninsured mortgages only, or in other words if you put 20% or more down.
Excited?
Well, the devil is in the details
- First, CMHC has announced recently to increase its premium by 20 basis points. Again, if you dont know, if you put less than 20% down against your purchase, banks require CMHC to be a guarantor for you and you pay CMHC a premium which is added in your total mortgage amount.
- Second and biggest concern is the eligibility criteria for a 30-year insured mortgage. You have to buy newly built property. That means you are limited to condos and townhomes because there is not much single-family inventory. And if there are any detached houses, they are about $ 1 million. Again and again, if you don’t know, for a purchase price above $1 million, you have to pay 20% down. No exception.
- Third is the return on your investment. Given the price per sqft of new constructions, your dollar will not go as far.
Amidst of so many issues, who is benefitting? Prairies and Maritime provinces. However, these provinces are not facing any affordability issues. Average home prices are already around $450k-$500k mark whereas average household incomes are high.
I am not saying it’s completely useless, but it could have been launched on a provincial basis. Not all provinces are doing the same when it comes to housing affordability. Provinces like BC or Ontario needs little bit more push as compared to Alberta or Manitoba to push affordability.
