CMHC's Shared Equity Program targets those who are likely to know very little about real estate, equity and mortgages.
The Shared Equity Program targets those who are likely to know very little about real estate, equity and mortgages.
Not many astute homeowners feel 'warm and fuzzy' about sharing their property ownership with anyone let alone the Government of Canada. First-time buyers may not realize that's exactly what CMHC's shared equity program is - it's sharing ownership of property and the profit/potential loss of property value with the Government in addition to having to pay back its second mortgage within twenty-five years.
Although this program can be enticing for new buyers because it boasts help with affordability, is interest-free and doesn't have to be repaid for a long time, it hasn't been very helpful in the long run as we have seen in other countries where it artificially drove prices up and created problems for homeowners who decided to later sell and/or refinance. And like any second mortgage, it will likely come with plenty of red tape, which can put homeowners in a bind.
By targeting the group of the home buyers who know the least about real estate, equity and mortgages, first-time buyers should be made aware of what this program can mean for them now and in the future.
It's no secret that first time home buyers tend to refinance their mortgage or sell their homes within the first five years of purchasing. Naturally, as their families get bigger, jobs change and lifestyles demand more, it's not unusual for them to either perform a major renovation, debt consolidation or move into a larger home. So it's likely this second mortgage from the Government will have to be repaid much sooner than twenty-five years since refinancing or selling with trigger a mandatory repayment of the loan.
And since the Government will expect their share of the profit, even in a refinance situation, this can hamper plans and dimish gains. So, as you can see, although the program boasts itself as interest-free, it clearly still does come with a price tag when the Government is expecting to share in your profits!
Furthermore, the accessibility to interest-free second mortgages may very well drive up property prices making homeownership all the more unattainable for the cohort of purchasers who need it the most. So think about it. While a purchaser may save one to two hundred dollars on their mortgage payment, they can also expose themselves to red tape and turmoil in the future along with giving away more than they bargained for!
I'm Sarah Colucci from Mortgages by Sarah! Let me know your thoughts! And remember, if you have questions at any time, I'm here to help!
Sarah A. Colucci
Sr. Mortgage Agent
Mortgage Edge, Broker 10680
Direct: (647) 773-4849