• Robert Floris CFP, AMP
    Lead Mortgage Agent
    M08004919
    905-574-9200 Ext. 215

  • Home buyer incentive risks

  • The newly introduced homebuyers incentive can be useful for first time homebuyers but there are homebuyer incentive risks.

    As you may already know, do we the new home buyer incentive program works is that the government contribute to your down payment but in return forms and equity stake in your home. This shared ownership can be paid back without penalty, within 25 years of owning the home or when you selll the home. I wouldn’t consider this one of the homeowner incentive risks, however, it is a fact that the percentage equity stake that the government owns, must be paid back based on the value of the home at the time. This means that if the Home goes up in value, you will owe the government more than they contributed when you purchased the home. This may all be obvious.

    Here is the part that may not be obvious when considering the home buyer incentive risks:

    For simplicity, let’s say that you received $5K from the government for your $100K home (5%). It’s 5 years later. You think your home is worth $200K now so you owe the government $10K. You pay up front for an appraisal that costs you $400 only to find out that your home is actually worth $250K. That means you actually owe the government $12.5K. You haven’t enough money to pay them back so it’s back to the drawing board! This cycle could continue with you wasting your money on appraisals trying to chase a moving target!!!

    Beware government interference!!!!

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