They call it “An Affordable Place to Call Home”.
There are 2 key factors in this recent budget to be implemented September 2019:
- First change is to allow First Time Home buyers to now withdraw up to 35K from their RRSP’s. This is an increase from the previous limit of $25K, so what does this mean? As a First Time Home Buyer you can borrow up to 35K from your own personal RRSP. This is an interest free loan back to yourself. You have 15 years to repay this amount back into your RRSP. For example, if you were to borrow the full 35K you would be required to put $2333.33 per year back into your RRSP or $194.44 per month. Failure to do so will result in a tax implication.
- The other change is what they call the First Time Home Buyer Incentive. This incentive needs to be applied for and be approved. The offer is for first time home buyers with a maximum house value of $500K and a household income under $120K per year. Also, the mortgage amount plus the incentive cannot be greater than four times the participants annual household income. The way it works is for a new build purchase you can qualify for up to 10% towards the down payment, and up to 5% on resale homes. This is not considered a gift, but a Shared Equity Mortgage funded through Canada Mortgage and Housing Corporation (CMHC). More details are to be released through CHMC which at this time we do not know. The idea behind this change to make the monthly mortgage obligation more affordable for the First Time Buyers. See our example below.
As of today, there are still many questions. How does one qualify? What are the implications long term with utilizing the Shared Equity Program? Hopefully these items will be addressed in future communications, but at this time we do not have the answers.