Federal program to help first-time homebuyers
March 28, 2019
The federal government’s new 2019 budget may give new-home buyers a shot in the arm toward purchasing their first home; even more if they buy a newly constructed one. The proposed First-Time Home Buyer Incentive program would give eligible first-time homebuyers the opportunity to share a part of the cost of buying a home with the Canada Mortgage and Housing Corporation (CMHC); five per cent for resale homes, 10 per cent for new builds. This would reduce the size of a new homebuyer’s insured mortgage.
The program is expected to benefit approximately 100,000 first-time buyers over the next three years. No on-going payments would be required with the Incentive, and families would have lower monthly mortgage payments. For example, if a borrower purchases a newly constructed $400,000 home with a five per cent down payment and a 10 per cent CMHC shared equity mortgage ($40,000), the borrower’s total mortgage size would be reduced from $380,000 to $340,000, reducing the borrower’s monthly mortgage costs by as much as $228 per month. Terms and conditions for the First-Time Home Buyer Incentive will be released by CMHC.
To make sure the program helps those with legitimate needs, the Incentive would have specific eligibility criteria, as well as guidelines to ensure participants are able to afford the homes they purchase. To qualify, first-time homebuyers must have household incomes under $120,000 per year, plus participants’ insured mortgage and the Incentive amount cannot be greater than four times the participants’ annual household incomes.
Highlights include:
- The CMHC would provide five per cent of the value of a home for a first-time homebuyer through a shared investment.
- This shared investment would be increased to 10 per cent for a newly built home. This step is to encourage the construction of new housing supply.
- The budget also proposes to increase the Home Buyers’ Plan withdrawal limit from a Registered Retirement Savings Plan to $35,000 from the current allowable amount of $25,000, providing first-time homebuyers with greater access to their RRSP savings to buy a home.