With this assumption, let’s consider the suggestions to help buyers save and borrow more money on a home purchase. (Just keep in mind that, as mentioned earlier, such initiatives will add demand and end up pushing property prices even higher.)
The truth is, some of these actions are unlikely to happen either, or just won’t make much of a difference for first-time buyers. For example, with real estate rules falling under the jurisdiction of the province, it is uncertain whether the Liberals could move forward with a ban on blind bidding. Similarly, the proposed changes to the FTHBI, which in its current form has not adopted much, only remove the equity component element from the mix; it improves affordability for first time buyers not over what already exists.
There are also issue that a new First Home Savings Account (FHSA) will only benefit those who already have enough RRSP savings to take full advantage of the homebuyer plan, or those with lots of TFSA savings (as they withdraw $ 40,000 instantly might get them into the FHSA and get a huge tax deduction).
That being said, as a first-time buyer, these initiatives can help you in three different ways:
1. You could qualify for a more expensive home
Homes priced at $ 1 million or more currently require a minimum of 20% down payment (over $ 200,000) as they are not eligible for a CMHC insured mortgage. Raising the insured mortgage limit for homes above $ 1 million, as both Liberals and Conservatives are suggesting, would allow some higher-income households to qualify for higher-priced homes without paying a larger down payment.
If the mortgage stress test were to be abolished (although it is not clear whether the Conservative proposal would abolish the stress test entirely or simply make it less stringent), buyers would also be eligible for larger mortgages and therefore could buy more expensive homes.
It is important to note, however, that while you can get into the market because you could then place more competitive bids (i.e., pay more for the same house), the houses you are looking at are not more affordable. You are simply taking out a larger mortgage to finance your purchase, which means your transportation costs will increase accordingly.
2. You could lower your monthly transportation costs
If you bought a home within your current skill levels and used the Liberal First Home Savings Account or NDP Rent Allowance to pay more money for your down payment, you would borrow less so your monthly payments would go down. The liberal plan to cut CMHC premiums by 25% could also easily lower your monthly carrying costs as you would no longer add the cost of the premium to your mortgage. The NDP plan, which allows for 30-year amortization (up from currently 25 years), would lower your monthly mortgage payments, but the tradeoff is that you would then pay your mortgage (and interest fees) for another five years – and those additional interest payments would increase the total cost of your home.