The Liberal government released their election-year budget with an attempt to give reprieve to first time home buyers feeling the crunch of escalating prices and stagnant salaries. This is a step in the right direction for first time home buyers.
Great news for Toronto right??
To hopeful Torontonians, this new legislation should mean as much to you as the New Kids On The Block going on tour means to me: essentially zero. Unless you count the night I take care of the kids while my wife goes to see Donny, and the boys do their thing.
If you're curious, read more about the program here but I will summarize briefly; the government proposes to give up to 10% down payment to first time buyers who meet their criteria for the program. This in turn would make homes more affordable by lowering monthly payments.
For example if you bought a $400,000 home with 5% down, the government would kick in an additional 10% making your mortgage of $380K shring to $340K. The Government wants you to put away the money you save but we all know you're going to blow in on something dumb and frivolous.
How will this affect the desperate buyers in the Toronto market?
Tough shit says the Feds. In order to qualify for the new program, your household must not make more than $`120,000 per year. Banks generally finance a purchase up to 4 times your yearly income, so even if you make less than $120,000 per year as a household, you have to find a place in Toronto for less than $480,000. GOOD LUCK!!
Of the 2,000 or so listings right now on the market, only 20% (429) of those are listed at $480K or less. Nearly all of those are condos with hefty maintenance fees so in order to qualify you would need to be significantly under the $480K threshold.
Upon brief examination of the properties that would fit this criteria, a large percentage of them are in notoriously high-crime areas so wear neutral colours. A handful are in a building where you can't get mortgage insurance because it has so many problems with the building. Others are quite inexpensive but have prohibitively high $1,000+ per month maintenance fees. Not a pretty picture unfortunately.
The long and short of it is that if you saw this on the news and thought you and your girlfriend/boyfriend/spouse could use it to buy a condo in King West or something, you better think again.
While this program should do a lot for first time buyers in smaller more rural markets it does little for those of you in the GTA. Sorry.
Are you going to be looking for a home in the next little while and want some free advice?