CMHC lets buyers work for down payment

By SHIRLEY WON
From Tuesday's Globe and Mail

Canada Mortgage and Housing Corp.is changing its rules so home buyers can use non-traditional ways, including sweat equity, to make the down payment on a house.

Grace Thrasher, a spokeswoman for CMHC, said Monday that home buyers who participate in the construction of their new home — doing work such as the plumbing, electrical wiring or framing — can now put the value of that work toward the 5-per-cent down payment required for a CMHC mortgage.

The down payment can now also come from the “cash-back” incentives given by certain lenders to people who take out a mortgage at their financial institution, or from borrowed funds, such as cash from personal loans, credit cards or lines of credit, Ms. Thrasher said.

The new rules, which apply to new and resale homes, take effect March 1.

CMHC will insure a mortgage for up to 95 per cent of the cost of a house, provided the home buyer produces the 5-per-cent down payment.

In the past, home buyers had to either come up with cash themselves or get a “non-repayable loan” from someone, such as their parents.

The new rule is “targeted to a very specific group,” Ms. Thrasher said. “They are ones who have a proven record to be able to manage their debt effectively –— the people who are making a good salary but have not been able to save for their down payment.”

Phil Soper, president of Royal LePage Real Estate Services Ltd., said the new rule could mean more first-time buyers will enter the marketplace, but he does not expect a dramatic increase in the volume of houses sold.