First Time Home Buyers Get Help: Federal Budget Highlights
The federal government unveiled a budget Tuesday, which touched on many key themes that were telegraphed ahead of time, including housing affordability, pharmacare and seniors’ issues.
The budget included a raft of measures aimed at improving home affordability. One notable inclusion is the First-Time Home Buyer Incentive, which would allow buyers to share the cost of purchasing a home with the Canada Mortgage and Housing Corp.
Under the plan, eligible first-time homebuyers could finance part of their purchase through a shared-equity mortgage with CMHC. The incentive is for insured buyers -- those who make a down payment of less than 20 per cent. This would reduce a buyer’s total borrowing costs and therefore their monthly mortgage payments.
The incentive is subject to various conditions, including that buyers have a household income below $120,000 a year. Full details of the incentive are forthcoming.
CMHC would offer eligible buyers a 10-per-cent shared-equity mortgage for newly constructed homes or 5 per cent for existing homes. The housing agency would provide up to $1.25-billion over three years, and the plan is expected to go into effect this September.
The budget offered an example of how the incentive would work. For a $400,000 home purchase, an insured buyer must have 5 per cent (or $20,000) for the down payment. For a new home, a shared-equity mortgage would offer $40,000, lowering the total borrowing costs to $340,000 from $380,000. The incentive would be repaid when the home is sold.
Separately, the government announced changes to how registered retirement savings plans can be tapped for home purchases. Under the current system, first-time buyers can withdraw up to $25,000 from their RRSPs to purchase a home without having to pay tax on the withdrawal. The budget proposes increasing the withdrawal limit to $35,000.
Source: Globe and Mail
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