New federal home buyers incentive good, but not good enough, broker says

A St. John's mortgage broker says the federal government's new First Time Home Buyer Incentive may help some buyers in the province, but more could be done to make houses affordable for new homeowners.

Leslie Penney, a mortgage broker with East Coast Mortgage Brokers, says many brokers have been advocating for changes, but he was "pretty shocked" with the Liberal government's announcement.

"When this announcement was released, it was a little bit off the mark for what we were pushing for as an industry," he said.

Penney said the government's shared equity plan will help encourage new home builds and make for lower monthly payments for homeowners, but he would rather see amortization extended from 25 to 30 years to help affordability

He expects the government's plan will benefit people in Newfoundland and Labrador, but won't have much of an effect elsewhere.

That's a great opportunity for anyone in this market, but when you take larger markets … that doesn't even scratch the surface. - Leslie Penney

"With regard to the rules around that, the maximum household income is $120,000 and the maximum purchase price would be four times that, so you take something around the $500,000 mark, that's a great opportunity for anyone in this market," said Penney.

"But when you take the larger markets, we'll say in Toronto or Vancouver where the average price is $750,000, that doesn't even scratch the surface."

Homeowners still require at least a five per cent down payment on a house, Penney said, which is the biggest purchasing barrier for many Canadians.

Questions remain

He said there are still questions about how the incentive will work, and how it will be paid back, that won't be answered until the full details are released this fall.

"From a homeowner's perspective, you've got the government with, essentially, an equity stake into your home," he said.

"So some of the clarity we're waiting to hear on — is it just a set amount up front, or as the equity increases or decreases in your home, is that shared as well?"

Paula Gale/CBC

That could also pose a financial risk for Ottawa, said Penney.

"We've seen instances where home values have been devalued, we've seen it locally, so in that case, there's a risk to the government," he said.

But whatever the final details of the plan may be, Penney said homeowners will still eventually have to pay back the five to 10 per cent equity stake to the government.

He said it's important that buyers prepare for that payment, and spend wisely.

"The big thing from our perspective as brokers is that if you're going to save this money on your mortgage up front, you want to be smart with that and either pay down debt or save it, not just dwindle it away."

Read more from CBC Newfoundland and Labrador