Canadians dream, plan and save in hopes of owning that perfect first home. Beautiful houses come and go on the market offering tantalizing snippets of dreams yet to be realized. Each one, however comes with the challenge of turning that dream into reality. Affordable home ownership has become increasingly difficult if not impossible for many in areas of rising home prices and low inventories.
The new First-Time Home Buyer Incentive program recently introduced within Budget 2019 has been put in place to facilitate Canadians in affording their first home dreams. Under this incentive, the Canada Mortgage and Housing Corporation (CMHC) would share part of the cost of buying a home with eligible first-time home buyers resulting in not only a decreased insured mortgage but also in lower monthly mortgage payments.
First-Time Home Buyer Incentive program highlights
Household income must be below $120,000/Year
• First time home buyers must have the minimum downpayment for an insured mortgage CMHC to apply to finance a portion of their home purchase through the shared equity mortgage program CMHC
• CMHC would provide 5% shared equity mortgage for an existing home and 10% shared equity mortgage for a new-build home; the money is to be paid back upon the selling of the home.
• Home Buyers Plan – The RRSP (Registered Retirement Savings Plan) withdrawal limit would be increased from $25,000 to $35,000 (tax-free if repaid within 15 years); from March 20, 2019 forward.
• Individuals experiencing a marriage breakdown would benefit from the Home Buyers’ Plan even if they do not meet the first-time home buyer requirement; beginning sometime in 2020.
• Additional information will be released by CMHC later in the year and the program is due to be rolled out in September 2019.
The CMHC Shared Equity Mortgage
Let’s put this it into real numbers, shall we? Without this new incentive, a $400,000 new-build home with 5% down ($20,000) and an insured mortgage of $380,000 over 25 years at a rate of 3.5% would come in at $1973/month. Whereas, with the new CMHC First-Time Home Buyer Incentive, that same new home at $400,000 with 5% down ($20,000), less the 10% ($40,000) incentive would yield an insured mortgage of $340,000 with a payment of $1745/month under the same scenario. This represents a savings of $228/month or $2736/year. This is real money in your pocket that can be saved or put towards other needs and priorities.
The Home Buyers’ Plan
The increased withdrawal limit of the Home Buyers’ Plan has been updated and offers amazing benefit for first-time home buyers. With the new increase, a couple wishing to purchase their first home will have greater financial flexibility allowing each to be able to withdraw up to $35,000 from their respective RRSP (Registered Retirement Savings Plan) funds for their down-payment; affording them the a possible $70,000 contribution. Withdrawals would be entirely tax-free; under the stipulation that they are repaid over a 15 year period. This new limit would apply to Home Buyers’ Plan withdrawals after March 19, 2019.
The Home Buyers’ Plan incentive is also addressing the financial strain many individuals face during the breakdown of a marriage. Under the modernization of the plan these individuals will be permitted to participate even if they do not meet the requirement of being a first-time home buyer; to be implemented sometime in 2020.
So maybe it really is time to start dreaming of that perfect first home. Budget 2019 and the CMHC First-Time Home Buyer Incentive are offering hope to many who believed that buying their first home might be out of reach. Certainly each individual’s situation is unique, but perhaps it might just be worth looking into. Reach out to your legal and/or accounting professional and speak with your bank and mortgage specialist to see which mortgage options are most optimal for you and your specific situation.
And when the time is right for you to find your special dream home, I hope you’ll feel free to reach out to me, Candis Noble. As a West Island real estate broker and interior designer it would be my pleasure to work with you and guide you through the each step of the exciting process. Let’s discover that hidden gem together!
Engel & Völkers • West Island Real Estate Broker • Interior Designer
[email protected] • 514-795-2610 • candisnoble.evcanada.com