24 Sep 2019

Well, there’s nothing quite like #election #promises to get me back in the spirit of writing my blog. After taking an extended absence (sorry!), and trying out new avenues for publishing content, it seems that the blog is where my heart is (and I should have never left, frankly).

It appears the gloves are completely between the two leading parties in our 2019 Federal Elections. Last week, the Liberal Party announced an interesting update to their Shared Equity Program by increasing the limit for first-time buyers only from $480,000 to $750,000 in the Greater Toronto Area. That was much, much more like what it should have been from the get-go. Now, some of you will cynically say “Sheesh, talk about VOTE buying!” when this announcement came out. Well, yeah! Of course! It always happens at every election, and it was a well-played card by Justin & Company.

(A reminder how the shared equity plan works. CMHC will “lend” you a % of your down payment – maximum 5% on resale homes – and co-invest with you until you sell your property. Once you sell, they want a small percentage from the sale plus their original investment. LOTS of holes to poke in the strategy but overall, I don’t mind the idea).

Today, the Conservative party announced it will: increase amortization to 30-years for first-time buyers with less-than 20% down, scrap the stress-test for renewals*, and “modify” the test itself entirely. More vote buying! Let’s break this down then bit-by-bit.

  1. Extending amortization to 30-years from the current 25. What will this mean? Today, a first-time buyer with less-than 20% down will qualify for about 4.7 TIMES income. Under 30-year amortization that bumps up to 5.2 TIMES income. Honestly? Not bad. A start, that’s for sure. While it won’t bump many upwards into houses they can’t truly afford, it may help them get into properties they can stay in, longer.
  2. Scrapping the test for renewals. Repeat after me. There. Is. No. Stress. Test. On. Mortgage. Renewals.
    1. If you know where to look
    2. If you’re not married to working ONLY with a bank
    3. If you want mortgage lenders fighting for your business that are awesome and competitive
  3. Scrapping the test entirely. THIS I would LOVE to see them (try) and I don’t think OSFI (the Governing body that decides these things) will ever allow it. Ever. But it’s a nice thing to say they will try to do! To do what exactly? That’s right, buy votes!

A lot of people are going to lose their minds on Twitter about this plan. They will cry and scream and complain “Great job by letting people get into more debt!”. My take? Housing is expensive (In Toronto especially) and this will just mean people can afford a little bit more than they could have today.

The third horse in the race is the NDP. Their plan is also to roll back amortization to 30 years, and doubling the current first-time buyer tax incentive to $1500 from $750. Although it’s funny – on their website they say that this will help with closing costs. Wrong! This is a tax incentive you file when you file your tax returns, and does not help with closing costs at the time of your real estate transaction. Nonetheless, the NDP is also looking at adding co-ownership to the CMHC portfolio (whereby people who are not related to each other will find it easier to get mortgages together). Finally, the NDP wants to try and address housing supply by making it easier and cheaper to build affordable housing PLUS go after the foreign-buying-money-launderers who have called Canada the best place to park their money (just google BC + Money Laundering and you’ll know what I mean).

All lofty goals, and all sound good in theory.

So which party should you support?

I can’t make this decision for you. Voting for a party should not be about one topic, only. Housing is a mega-topic in today’s society but there are equally huge issues at play such as climate, the economy and safety. It’s clear that all mandates target one major market: the FIRST-TIME-BUYER. So, no matter who wins, the end result is this group will benefit most from today’s election promises.

 

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