Federal Budget: Incentives for First-time Home Buyers

Posted on 19 March, 2019

Incentives

Canada’s federal government unveiled their 2019 budget this morning, which includes two notable incentives for first-time homebuyers:

  1. The Canada Mortgage and Housing Corporation (CMHC) will provide down payment assistance up to $1.25 billion over the next 3 years for eligible buyers through a ‘shared equity mortgage program.’
  2. The withdrawal limit for the current RRSP Home Buyers’ Plan will be increased from $25,000 to $35,000 effective March 20, 2019.

These measures are being put into place to aid those who are facing significant barriers to home ownership. Canadian Finance Minister Bill Morneau expects the number of first-time buyers to increase to 140,000 per year, up from the current level of 100,000. According to Scotiabank economist Marc Desormeaux

this is providing additional support for individuals who have already qualified for homes, helps them relieve some of their monthly payments once they’ve qualified for a mortgage and entered into the contract. The concerns about stoking demand from some of these measures aren’t concerns we would raise at this time.

Eligibility
  • Assistance will be available to first-time homebuyers with a household income below $120,000.
  • The mortgage must be no more than four times the gross household income. This means the maximum price for an eligible home would be about $505,000.
  • For the Home Buyers’ Plan RRSP withdrawal, the program is being expanded to include those who are newly separated from a marriage or common-law relationship.
 
How Eligible Amounts will be Determined

The amount of funding assistance you will be qualified to receive will be dependent upon two factors:

  1. Your current household income level.
  2. Whether you are purchasing an existing or newly built home. The government is planning to cover five percent of the down payment for an existing home, and ten percent of a new build.
 
Example

If you purchase an existing home for $350,000 and put five percent down, your down payment would be $17,500. Through the shared equity program, CMHC would also contribute $17,500, bringing the total cost of your insured mortgage from $332,500 to $315,000. This would help lower your monthly payments and make home ownership more affordable.

 
What to watch out for

Although the logistical details are yet to be finalized, the government plans to recoup these costs when the house is sold; no monthly payments towards this program would be expected from home buyers. The federal government will be releasing further details in the near future, and expects the shared equity program to begin in fall of 2019.

If you have questions about this program or would like some help determining your eligibility, our office is happy to help. Please feel free to contact us for a free consultation!


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