In the new budget announcement there were two major incentives for First Time Home buyers:
- The maximum withdrawal from one’s RRSP has been increased from $25,000 to $35,000 for a single individual, meaning a couple can withdraw up to $70,000 in total.
- Keep in mind that Home Buyers still have to repay the money into their RRSP over 15 years to avoid having to pay income tax on the amount withdrawn.
- The new limit will apply to purchases made after March 19, 2019.
- This will also be available to people going through a marriage breakdown who don’t meet the usual requirement of being a first time home buyer.
- The Government has also proposed $1.25 billion funded through Canadian Mortgage and Housing Corporation (CMHC) over the next three years. They will provide a further reduction of 5% of the cost of an existing home and 10% of the price of a new construction as an interest free loan to be repaid when the property is sold.
- The buyers must have their own down payment of a least 5% down but less than 20% since it has to be an insured mortgage.
- Household income must be less than $120,000.00
- The purchase price cannot be any more than four times the buyers’ household income. Meaning that the max purchase price cannot exceed $480,000.
For example if the buyers’ are purchasing a $400,000 resale home. They must have $20,000 saved towards their down payment making the mortgage $380,000. Under this program CMHC will further reduce your mortgage by a another $20,000 making the total mortgage around $360,000.
What is not clear at this point is this:
- If there will be higher CMHC insurance premiums added under this program.
- How the interest free loan is actually going to be repaid.
- Will CMHC share in the gains or loss when the person sells the home?
We are assuming these details will be rolled out over the new few weeks or months. It also sounds like this will be up and running by September of this year.
Hopefully we will have more details soon. If you have any questions please feel free to ask. 905-404-5921