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What The 2019-2020 Federal Budget Means For First Time Home Buyers

First Time Home Buyers Incentive Canada:

Are you or someone you know…

  • a first-time home buyer
  • in a household with an income of less than $120,000 per year
  • purchasing a new or existing build valued at less than 4 times the household income
  • have a down payment of at least 5% but less than 20% of the purchase price

If you answered YES to the questions above, then keep reading as this may change the way you approach your first purchase. Those who fall into these criteria may qualify for an interest-free loan from Canada Mortgage and Housing Corporation (CMHC). This loan would be 10% of the purchase price of new builds and 5% of resales. That means that some families will qualify for as much as $40,000 if they are buying a new home.

So, what’s the catch? Unfortunately, as these changes don’t come into effect until the fall (specifically September), some of the fine print is still unknown for this first time home buyers incentive in Canada. We can however, speculate that the loan will likely have to be repaid at the time of (or before) the sale of the property. There is also potential for an additional percentage to be repaid if the property sees an increase in value.

Increased Withdrawal from RRSPs:

For many first-time home buyers, a tax-free withdrawal from their RRSP is a major step in purchasing a property. Until recently, this transaction was limited to $25,000 per person. The recent budget announcement included an increase of $10,000 to this limit, bringing it up to $35,000.

This change is effective immediately and can also apply to people who are facing divorce or the separation of a common-law partnership. It should be noted that home buyers are still required to abide by the 15-year repayment period if they want to avoid being taxed. So, for those looking to take advantage of these changes, it is important to ensure that even though more money is available to be withdrawn, it can still be paid back in time.

The Bottom Line

For those who qualify for these programs, there is undoubtedly some great opportunities. That being said, unknown details and the limitations on purchase price have some concerns that these initiatives will have minimal positive repercussions on Canadians.

Continue to keep an eye out for more blogs from Tim Lacroix for updates on future changes like this one. 

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