Are you looking to purchase your first home? If so, then the Federal government’s Budget 2019 announcement will be music to your ears.
Aimed at supporting first-time home buyers, the government recently introduced two significant measures that address issues on affordability in today’s tight housing market. The measures include a withdrawal increase to the RRSP Home Buyer’s Plan and a new Shared Equity mortgage program. Interested in learning more? Check out our Blog Post here for more details
What do these measures mean for you?
Budget 2019 proposes to increase the Home Buyer’s Plan withdrawal limit to $35,000 (up from $25,000), tax free, from first-time home buyers’ RRSP. If you have a co-borrower, the total towards your down payment could be as high as $70,000.
The First-Time Home Buyer Incentive will allow eligible first-time home buyers to finance a portion of their home purchase through a “shared equity mortgage” with Canada Mortgage and Housing Corporation (CMHC). In short, the government will extend a loan to first-time home buyers who have already made the minimum down payment for an insured mortgage.
The shared equity mortgage works as a one-time lump sum loan, so that there are no ongoing payments with the Incentive. This reduces the total mortgage size, meaning that the borrower will have significantly reduced monthly mortgage payments, although the exact terms of this Incentive have yet to be finalized.
The loans can be worth up to 10% of the purchase price for a newly constructed home, or up to 5% for an existing home. The larger shared equity mortgage for new constructions aims to encourage more home construction to address housing supply shortages in Canadian cities.
The program is available for buyers with household annual incomes under $120,000, and the loan portion is capped at four times the annual income. The Federal government expects at least 100,000 households would benefit from the Incentive over the next three years.
As the details on the Incentives become clearer, we will keep you informed of any new developments.