The New Budget and You

If you’re a first-time homebuyer, the recent federal budget announcement may help you get into your first home.

The Federal government introduced two measures in their recent budget to address first time home buyers and affordability -- A withdrawal increase to the RRSP Home Buyer’s Plan and a new Shared Equity mortgage program.

These measures are aimed at helping first-time homebuyers like millennials and new Canadians break into a housing market. The Shared Equity program, with its interest-free loan program may help earners most affected by the stress test.

Here are the two announcements:

Home Buyer’s Plan Withdrawal Increase. First time home buyers can now withdraw up to $35,000 from their RRSP, tax free, up from $25,000, for a down payment. If you have a co-borrower, that total could be up to $70,000.

First Time Home Buyer Incentive. Billed as a "shared equity mortgage”, the government will lend first-time home buyers’ money to buy a home. According to the budget document, this new incentive "enables homebuyers to reduce the amount of money required from an insured mortgage without increasing the amount they must save for a down payment.

”The loans can be worth up to 10% of the purchase price of newly built homes, or 5% of the price of resale homes. The program is available for buyers with household incomes under $120,000 annually, and the loan portion has a cap of four times annual income.

Shared-equity mortgages do not require interest payments or continuing principal repayments, with the loan repaid when the home is sold.

While that might not seem doable for many households, especially in higher-priced markets, the program is aimed at first-time homebuyers who have been shut out of housing by new mortgage stress-test rules.

Mortgage Professionals Canada, the association for mortgage brokers has estimated that the original stress test would compel about 200,000 potential home buyers to change their plans in the first two years of operation. This program may help a number of those people.

Of course, the devil is in the details, which are still being worked out and I will keep you up-to-date on any new information.