New Incentives for First-time Homebuyers

Authors: Jared Dunlop, Marek Coutu

The 2019 Federal Budget unveiled two new incentives for people looking to buy their first homes:

  1. The First-Time Home Buyer Incentive and
  2. Increased RRSP withdrawals

The First-Time Home Buyer Incentive

Under the new First-Time Home Buyer Incentive, Canada Mortgage and Housing Corporation (“CMHC”) will provide interest free financing for up to 10% of the value of the home through a “shared equity mortgage.”

For example, if a homebuyer purchased a new $400,000 home under this incentive plan and received a 10% CMHC shared equity mortgage, the homebuyer’s mortgage costs could be reduced by as much as $228 per month.

The homebuyer will eventually have to pay CMHC back for money received under this incentive program, although the terms of repayment have not been released at this time. In any event, the homebuyer will not be required to make ongoing payments toward this shared equity mortgage during the mortgage term.

In order to qualify for the incentive, a first-time homebuyer must have:

  • a household income of less than $120,000 per year and
  • at least a 5% down payment for the home he or she would like to purchase.

If a first-time homebuyer meets those two requirements, he or she may qualify for the incentive. There are few other specifics to consider:

  • The incentive will only be available for homebuyers where the mortgage plus the CMHC loan is four times or less than the homebuyers’ household incomes. For example, if a homebuyer’s household income is $100,000, the maximum amount he or she could spend on a home while still qualifying under the incentive is $400,000.
  • There is a distinction between newly constructed homes and existing homes. A homebuyer purchasing a new home may qualify for a shared equity mortgage of up to 10% of the value of the home; whereas a homebuyer purchasing an existing home will only qualify for a shared equity mortgage of 5% of the value of the home.

Increased RRSP Withdrawals

The 2019 Budget will also increase the amount of Registered Retirement Savings Plan (“RRSP”) withdrawals a homebuyer can make when purchasing his or her first home. Currently, a first-time homebuyer can only withdraw up to $25,000 from any RRSPs he or she may have saved for the purchase of a home. The 2019 Federal Budget increases this limit to $35,000.

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Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.