While our industry continues to lobby for ways to make home buying easier for Canadians, we don’t always get everything we want when a new budget rolls around each spring. However, the recent budget included a few steps in the right direction with some Housing Affordability Measures that will be applicable for many in Brampton and surrounding areas.
There are three primary measures: an incentive for first-time homebuyers, an increase in the RRSP funds first-time buyers can access for a down payment, and a special provision for divorced Canadians trying to purchase a home. Here are the details:
- First-Time Home Buyer Incentive (launches September 2019)
This new measure is basically a shared equity program designed to reduce mortgage payments. You’ll need to be a first-time homebuyer with at least 5 per cent down payment saved up. The Canada Mortgage and Housing Corporation (CMHC) will provide 5 per cent of the cost of an existing home, or 10 per cent of a new home in what amounts to an interest-free loan that isn’t payable until you actually sell the property. So eligible buyers will be carrying less debt, which means lower monthly mortgage payments. You can see there is some extra encouragement to purchase a newly built home: a move that is expected to boost home construction to help address a housing shortage.To be eligible, your household income cannot be more than $120,000. And your total borrowed amount, which includes the incentive portion, can’t be more than four times your household income. The maximum purchase price is approx. $505,000 with 5 per cent down.Overall, we think this measure is not a bad boost for first-time homebuyers. We’re still waiting for some details on how the incentive is paid back and the process for sharing property valuation ups or downs. If you or anyone you know is getting ready to buy, send them my way and I can discuss how they might take advantage of the new program, which launches this fall.
CMHC’s First-Time Buyer Incentive – Mortgage Payments
|
Today |
5% Incentive |
10% Incentive |
|
|
Purchase Price |
$500,000 |
$500,000 |
$500,000 |
|
Down payment 5% |
$25,000 |
$25,000 |
$25,000 |
|
Incentive |
$0 |
$25,000 |
$50,000 |
|
Mortgage |
$475,000 |
$450,000 |
$425,000 |
|
Monthly Payment |
$2,332 |
$2,209 |
$2,086 |
Based on 25 yr am, 5 yr term, 3.34%
- Boosting the Home Buyers’ Plan (effective immediately)
Getting together that first down payment is always a hurdle in home buying. The current program allows first-time buyers to borrow up to $25,000 from their RRSP to put towards your down payment. That just went up to $35,000. Usually, of course, you would pay tax on any RRSP withdrawal. This government program lets you benefit from your own savings – by allowing you to lend yourself RRSP money, with up to 15 years to pay it back. The limit, by the way, applies to each qualified buyer. So a couple buying a home together could access up to $70,000 by each taking advantage of the $35,000 limit. This increased amount is effective now. - Divorced individuals eligible for tax-free RRSP withdrawals (available after 2019)
This has been a problem for past clients: they’re not technically “first-time” home buyers, but they are newly single after the breakdown of a marriage or common-law partnership and struggling to get back into a home of their own. In the past, they haven’t been able to qualify for the Home Buyers Plan, because they’ve owned a house before. The 2019 federal budget now stipulates that these individuals can qualify for the Home Buyers’ Plan, and use their RRSP savings towards a down payment to make a fresh start. This will be available for withdrawals made after 2019.
So what’s the verdict on the 2019 budget? These are certainly good measures for some homebuyer groups in Brampton and surrounding areas, although somewhat complicated for most to navigate on their own. More than ever, homebuyers need advice from an expert mortgage professional.
Got a home buying dream? Contact me today. If there’s a way, I’ll find it.
