The new Liberal Budget was released today and here are some relief or help for First Time Home Buyers.
- $1.25B over 3 years on shared-equity mortgage program for first-time home buyers.
- RRSP withdrawal limit for first-time home buyers rises to $35,000 from $25,000.
Shared Equity Mortgage Program for first-time buyers
The First Time Home Buyer Incentive is being introduced as a way to help with housing affordability. The government is earmarking $1.25 billion over three years for something it's calling a "shared equity mortgage." Essentially it equates to an interest free loan, equal to between 5 and 10% of the purchase amount, from the government toward your down payment. However, that loan will need to be repaid in the future, either at sale of the home, or sooner if the borrower wishes to.
In order to qualify, an applicant must have a household income of less than $120,000 per year and be able to come up with a five per cent down payment — the minimum requirement for an insured mortgage with the Canada Mortgage and Housing Corporation (CMHC). Under the program the CMHC would kick in up to 10 per cent of the value of a newly built home, or five per cent of the value of a resale.
To quantify this, lets assume a first-time buyer wants to buy a home that costs $400,000, they'd have to come up with a minimum $20,000 down payment for a mortgage of $380,000. Going forward, for a resale home, the program would kick in $20,000.00 for a reduced mortgage of $360,000 which results in a payment reduction of approx. $120 per month.
This program is expected to be launched in the fall.
RRSP home buyers plan limit increase to $35,000
First time buyers can now withdraw up to $35,000 ($70,000 per couple) from their RRSP for a home purchase without taxation, up from $25,000 previously. The amounts withdrawn must be replaced in the RRSP over the following 15 years to maintain the tax free status of the withdrawal. Note that this program has an unusual definition of first time buyers which includes people who have not owned a home for the past 4 years, tied back to January 1 of the calendar year 4 years before the withdrawal.
If you are looking to buy your first home and would like more information and assitance in the Lower Mainland Real Estate Market please contact me directly.