Carrick on Money

September 22, 2019

Help for those having trouble affording a home
Help for those having trouble affording a home - Plus ground rules for parents on helping kids buy a house

Rob Carrick

Personal Finance Columnist
The focus early on in the federal election campaign has been on making life more affordable. The narrative is that families are falling behind financially because of a range of rising costs, notably buying and owning a home.

As part of their platform, the Liberals say they would make changes to their First-Time Home Buyer Incentive, which was officially launched in early September. The program offers an interest-free loan to first-time buyers to help them increase their down payment. This means a smaller mortgage and more manageable payments.

The original version of the incentive is aimed at households with an income of $120,000 or less and enables them to buy homes in the $500,000 to $560,000 range at most, depending on their personal situation. The changes the Liberals will make if reelected would cap the upper limit at $789,000 in the Greater Toronto Area, Vancouver and Victoria. Also, households with an income of $150,000 would be able to use the program in these markets.

The benefit of the home-buyer incentive is a lower mortgage payment. The government has estimated that the program could save homeowners up to $286 per month. If you’re desperate to buy a home and are worried about affordability, those savings will make the purchase more manageable.

One commentator believes the incentive is a bad deal overall, largely because you give up some of the tax-free appreciation in the value of your home when you sell. The incentive offers up to 5 per cent of the cost of an existing home and up to 10 per cent of the price of a new home. If you sell at a big profit later on, you have to repay the same percentage of the higher selling price. If the house is worth less than you paid, your repayment amount would also fall. But repaying this government share could eat into your remaining equity in your home.

If your primary worry is buying and affording a house right now, then the first-time buyer incentive is worth a look because it will make life more affordable. If you take the long view on what’s best for your finances, you may not find it worth using.

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Rob’s personal finance reading list…

Financial planners tell you how to get out of debt

Seven solutions for fighting debt from experts who have seen what works.

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Changes coming at a good investment product you may not know about

All about some new developments for TD’s e-series index mutual funds, which are a good alternative to exchange-traded funds for low-cost index investing.

Ground rules for parents on helping kids buy a house

Included here on this bit of advice alone: “If helping your child to buy a property is your way of forcing your child to become financially responsible, you’ll probably be very disappointed.”

How an expensive wedding can ruin your finances long after the big day

A look at how big spending on a wedding can lead to a “treat yourself” mentality that results in continued over-spending.

Ask Rob

Q: I am a DIY investor in exchange-traded funds. My portfolio is about 60 per cent equities and 40 per cent bonds. How often should I rebalance?

A: Rebalancing means selling some of your best performers and buying some more of your weakest investments to get them back to the mix of assets that you targeted when you started your portfolio. Your big concern in rebalancing is keeping your blend of stocks and bonds in line. Rebalancing twice a year should be fine.

Do you have a question for me? Send it my way. Sorry I can’t answer every one personally. Questions and answers are edited for length and clarity.

Today’s financial tool

Need a strategy for whittling down your debts? Try this debt-payoff planner.

In case you missed these Globe and Mail personal finance-related stories

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  • The DB pension plan business model has failed – and everyone is paying the price
  • How Canada’s suburban dream became a debt-filled nightmare (for Globe Unlimited subscribers)
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