Canada Mortgage and Housing Corporation (CMHC) clarifies CMHC’s position with respect to housing loans when an incentive is associated with a purchase transaction. For example at an Open House the Seller's Realtor may offer "the Builder will include a three stainless kitchen appliances with any purchase made in May at the price of two seventy five."
Any number of thought may arise as to how the offer to include three appliances impacts the consideration of buying a property. One possible direction to ponder is how such an Incentive to purchase might effect a Buyer's ability to be approved for the purchase financing at the present time or possible effect to the Buyer financially down the road. After all it is clear that there are "no free lunches". If a Seller is offering a special deal there is a desired outcome attached. Is the outcome to be shared with a Buyer? An Incentive may help smooth the rough edges so that a deal feels possible to the Buyer... "At the right price of course".
With relation to Finacing:
Offer to Purchase Incentives that contribute to the overall value of the property (e.g. flooring upgrades, finishing upgrades, condominium parking space) are assessed as per any regular mortgage insurance application.
Incentives that do not contribute to the overall value of the property and that have associated cash values such as vendor cash backs, interest rate buy-downs, the waiving of condominium fees and /or mortgage payments for a period of time, cars or car leases, vacations will be deducted from the purchase price.
The reduction of the purchase price by the amount of a purchase incentive ensures that the lending value of the property is not unduly inflated by the incentive being offered or that the borrower’s equity position is not affected. If CMHC deems an appraisal is necessary in order to determine the impact an incentive has on value, CMHC will order one at its own expense. Where the market value comes in lower than the submitted value, the purchase price will be reduced accordingly. Borrowers must also be qualified exclusive of any incentive. Please note that a purchase incentive is an ineligible source of down payment.
CMHC does not view as incentives generally accepted market practices of including household items (e.g. common household appliances, lighting fixtures, window coverings) that are negotiated as inclusions between a vendor and a purchaser as part of a specific real estate transaction.