The 2019 Budget that the Liberal government has recently put forth allows more middle income Canadians fulfill their homeownership dream, by helping them lower their mortgage costs. Specifically, it is implementing 3 measures:
CMHC First-Time Home Buyer Incentive
Eligible buyers will be offered a 10-per-cent, shared equity mortgage for a new home or five per cent for an existing home.
This incentive will only be available to households with incomes under $120,000, and on mortgages no more than 4x the household’s total income or up to $480,000.
The applicants still have to qualify for under the federal stress test, ensuring that borrowers are able to keep up with their debt repayments, even at a higher interest rate.
Here’s a scenario with the mortgage incentive:
A typical borrower would have to make a down payment of at least 5% of the purchase price. The government would contribute up to 10% of the purchase price. The contribution would effectively reduce the amount of the mortgage and subsequently the monthly mortgage payment. The illustration below demonstrates this:
Home Buyers Plan (HBP)
The new budget will also enable a first-time homebuyer to withdraw $35,000 from his/her RRSP towards the purchase of a home. Previously the limit was $25,000. A new measure includes those who are recovering from a breakup of a marriage or common law relationship.
The repayment rules remain the same: homebuyers must put the money back into their RRSP over 15 years, to avoid their HBP withdrawal being added into their taxable income.
Construction of more rental units
The budget also includes $10 billion more for a program to fund the construction of new rental units – the third time the Liberals have expanded the program, which aims to create 14,000 units over 10 years and now carries a $50-billion price tag.
We are currently in a buyer’s market. If you are planning on buying a home, you need to get in touch with an experienced real estate company such as ours to take advantage of this market. Contact us by email or call us on 604 695 1000.