In this year’s budget, the federal government announced a program for first-time homebuyers that would offer between 5% and 10% top up from the Canada Mortgage and Housing Corporation.

If you’re buying a brand new home, the CMHC will give you 10% of the total cost, and it will offer 5% if it’s an older construction.

The idea is to give people struggling to afford their first home a break on their monthly mortgage payments. Buyers would still need to put down at least a 5% down payment. Families will have to have a net income of less than $120,000 to qualify, according to news reports.

It’s not clear yet how the repayment process would work, whether you’d have to repay the money with interest when the house is resold, or by some other mechanism. But even if you do qualify for the new CMHC grant, you’ll still need to pass the mortgage stress test. That test measures whether you can handle not just the mortgage at the rate you’re signing for, but they also test when you can handle an additional two percentage points to that.

The Government of Canada has an online calculator where you can test whether you’ll qualify for a mortgage.

I’ve seen a lot of problems with the stress test, and think one thing the government can do is to re-introduce the longer 30-year amortization period. That’s going to allow people to be able to give them a little bit more latitude when they’re actually getting qualified for a mortgage.

It can have a big impact, and not just when you’re first buying the home.

I recently had a client who was a teacher earning about $78,000 a year. And just because they had a (new) car payment, all of a sudden because of the new stress test, they no longer qualified. This is someone with a good job, good income… everything is perfect.

If you have any questions about the new mortgage rules, incentive programs or refinancing, do not hesitate to contact a Dominion Lending Centres mortgage professional near you.

By Terry Kilakos