First Time Home Buyers in Canada
Using a shared equity mortgage with the Government of Canada, First-Time Home Buyer Incentive provides 10 or 5 percent for the purchase of a home that is newly constructed for the 1st time home buyer, around 5 percent for resale or newly manufactured or mobile home, and 5 percent for s resale / existing home of 1st time buyer.
For the incentive’s shared equity component, the government will partake in both the gains and losses associated with the value of the property, subject to a maximum loss or gain of 8 percent per year on an incentive amount from the date of paying an advance until the date of repayment.
The borrower cannot save much down payment, by gaining the incentive to afford the costs of the mortgage. This increase in the down payment will result in a smaller mortgage and consequently will cover the monthly costs. Incentives according to the market value of the house will have to be repaid by the homebuyer at a payment time equal to 5 or 10 percent of the original house value.
Effects of Mortgage Rates
An increase in interest rates will cause you to borrow more money. If someone has a line of credit, mortgage, or any other loan with different interest rates, an increase in the interest rates may have an impact on you. A loan or mortgage with a set interest rate needs to be renewed.
The values of the home banks are limited by the high-interest rates. The high-interest rates also make home purchases difficult when the interest rates are very high. An additional rise of 2 percent in the high mortgage rates has increased the stress and worsened the housing affordability concern.
Affordability of Mortgages
Mortgage affordability is a term used when we are talking about that particular money that is lent to you by the lender. Since the early days, when all you had to do was triple your money, a lot has changed. Either 2.75 times your joint income or 3.50 times your single income would apply back then.
Current Interest Rates
In only one year, 2022, around 7 interest rate hikes have been implemented by The Bank of Canada. The interest rate was approximately 0.25 percent in February and this was increased to about 4.25 percent in December.
When the interest rates hiked from 0.25 percent to 4.50 percent in the years 2022-2023, this rise was sixteen times higher, which will significantly affect the economy of the country. This rapid increase in the interest rates is because of high inflation and is also expected to subside this year and consequently, prices will come down.
Home prices V/S Mortgage Rates
There is a direct relationship between home prices and mortgage rates. If the mortgage rates are high, it will consequently become more expensive to buy a house and the real estate market has also begun to have a look as the prices are decreasing in recent months. In 2023, a further increase in the rates is expected, which could dampen the real estate market due to a rise in mortgage payments.
