Ep. 35 Will CMHC Reforms Make Vancouver More Affordable?

What if the federal government's new CMHC guidelines could finally make home ownership a reality for millennials and Gen Z? Tune in to today's episode of Keeping it Real, where we dissect the recent changes aimed at making housing more affordable in high-cost areas like Vancouver and Toronto. I'm your host, Jacquie McCarnan, a North Shore residential realtor, and I'm here to walk you through the impact of raising the CMHC insurance limit to $1.5 million and the expansion of 30-year mortgage amortizations for first-time buyers and new builds. 

We'll explore how these adjustments could be a game-changer for those transitioning from renting to owning, while also discussing the practicalities and limitations of qualifying for these mortgages. Is this the breakthrough many have been waiting for, or just a small step in the right direction? Join us as we unpack these significant policy shifts and consider what they mean for the future of Canadian real estate. Plus, stay tuned for a sneak peek into my exciting new project that bridges my passion for real estate and nonprofit work.

Transcript

Speaker 1: 0:00

Hey, friends and people I've never met before, welcome back to Keeping it Real, the Vancouver and area residential real estate podcast that aims to I don't know what like keep it real. My name is Jackie McCarnan and I am your host for Keeping it Real. I am a North Shore residential realtor and I do a bunch of other stuff too. For those of you who religiously listen to this show every week, this is episode 34. I missed last week because I am working on a massive, cool project that is real estate related but also related to my work in nonprofit. The announcement about the new venture is coming soon. We're just working on all the assets so that I can bring it to you in a way that will get you as excited about this as I am, although I will preface that with the notion that it will be more exciting to people who work in real estate and related industries than it would be to maybe your run-of-the-mill regular, ordinary person who's interested in real estate. Over the last year on this show, I've talked about a lot of stuff. Most of it is related to either provincial government or municipal government and how they all relate to real estate, and today's episode is going to be about federal government stuff, specifically the new CMHC guidelines. So without further ado which I say all the time and I really wish I would stop without further ado cannot stop obviously.

Speaker 1: 1:37

Here is episode 35. It's no great secret to anybody living in Canada that housing has become pretty unaffordable, particularly in the big cities like Toronto and Vancouver, and so the federal government has come out with a plan to help improve affordability, and they say particularly for millennials and Gen Z or, yeah, gen Zs, but it's gonna, hopefully it's gonna help everybody who's looking to buy a home in Canada. So I'm sure you've heard of CMHC, canadian Housing Mortgage Corporation. In the old days, like two weeks ago housing mortgage corporation. In the old days, like two weeks ago, when you wanted to buy a place that had to be insured meaning you put less than 25% down that mortgage had to be insured. The value of the place that you bought had to be under a million dollars, and so, as of September 16th, the federal government and CMHC have increased that limit to $1.5 million. So you can now purchase a home up to the cost of $1.5 million and get CMHC insurance. You'd only do that if you can afford the full down payment of 25%. I just got to double check. I always get it mixed up if it's 20 or 25%, yeah. So for those of you whispering 20%, it is 20%. I just went back and checked.

Speaker 1: 3:15

The other thing they did was they expanded eligibility for 30-year mortgage amortizations for all first-time homebuyers and to anyone buying a new build. So the idea of this is to reduce the monthly mortgage payments and help more people qualify for mortgages. And I'm not going to go into exactly how you qualify for a mortgage. You can talk to a mortgage broker about that, because I do not hold a license in mortgage brokering broker about that, because I do not hold a license in mortgage brokering. I'm a realtor. But basically it's all well and good to say that you are going to put 10% down and have the mortgage insured, but that 10% you still have to qualify to make those monthly payments right. So if you put 10% down and the monthly payment is $4,000 a month, you have to earn enough money to afford that $4,000 a month. So it's not always a great benefit. But with a longer amortization period that monthly payment comes down a little bit Not a ton, not as much as you would think and you pay more interest over time. But it is an option and a way for people to get into the market and start paying their own mortgages instead of rent for somebody else.

Speaker 1: 4:28

The last time any changes were made to CMHC requirements was 2012. So this is long overdue, 12 years in the making, and I definitely I mean I'm not sure that 1.5 million is going to be enough. I guess it is. If you are young and you're, you know, looking for your first condo, yes, it's going to be enough. But if you're looking to buy a home in greater Toronto or the lower mainland in Vancouver, 1.5, it's probably not going to get you there. There might be a couple of pockets where you can get a home for 1.5 million, but not too many.

Speaker 1: 5:05

I've talked before about some of the incentives that are available to first-time homebuyers. For example, there is a tax-free first home savings account, which allows Canadians to contribute about $8,000 a year $40,000 over their lifetime into a tax-free savings account specifically for down payment. There's also the enhanced homebuyers plan, which was in the 2024 budget, and it enables first time homebuyers to use the tax benefits of their RRSP contributions and to save up to $25,000 for their down payment. So you can take $25,000 out of your RRSP and use it as your down payment. I mean, these are all really good measures and hopefully enough people know about them so that they actually start saving for these things. So there are a couple other things about this government plan that I found interesting and that I think are going to help some people Just kind of get into some of the specifics of it here.

Speaker 1: 6:05

So you can put 5% down on the portion of the purchase price up to $500,000. And then you have to put 10 percent down between $500,000 and $1.5 million, and the minimum down payment on a $1.5 million home is now $125,000 versus $300,000, which presumably it's obviously easier to save up $125,000 than it is $300,000. There are a couple of new things about who's eligible for this too. So it's going to be first-time homebuyers, so somebody who's never purchased a home before. And then the next one is someone who has not owned or occupied a principal residence in the last four years, and also someone who has recently experienced a breakup in marriage or common law relationship, in line with the Canadian Revenue Agency's approach to the home buyers plan, which means that you have to have declared that you are no longer married, and I believe that there are specific circumstances that will then allow you to use the incentives for first-time homebuyers if you're in that position, which is interesting.

Speaker 1: 7:24

This program definitely isn't for everyone. I think it's mostly the federal government saying, okay, we figured out a way to make this affordable for more people and it really just makes up part of the federal government's commitment to making housing affordable. There's a new $250 million fund available to provinces and territories to help end encampments and address homelessness. That's all part of the same sort of announcement, and also there's the blueprints for renters' Bill of Rights and homebuyers' Bill of Rights, which are also working to achieve some sort of change in our housing issues, and I don't know if they're going to work. I'm not an economist. I've said that many times on the show. I'm interested to know what your thoughts about this are. But also, I mean, at least somebody is doing something and they're doing it at all levels of government here in Canada. I think that there are a lot of people who will poo everything as not being enough or being too little, too late, but honestly, we got to start somewhere, right. So, um, let me know if you have any opinions of that.

Speaker 1: 8:43

I apologize for missing last week. It, uh, it's super busy with this new venture. I don't know if I will be doing weekly podcasts, but there will be something else coming in its place and I think you're going to like it. Once again, thank you so much for listening to Keeping it Real. You can get Keeping it Real anywhere. You get your podcasts, including Spotify and Apple Podcasts, or you can hop on over to my website, northvanhomesalescom and under podcast, and there you can see all of the episodes as well. As always, thanks so much for listening to Keeping it Real and have a wonderful weekend. Oh, and you can ask me any questions you like about real estate. I'm always going to be here to answer them.