First Time Home Buyers Get Some Help From The Federal Budget
Tuesday May 07th, 2019
The Federal Government announced proposed new initiatives for First Time Buyers. CMHC (Canadian Mortgage and Housing Corporation) is launching a $1.25 billion initiative to make purchasing a home easier:
CMHC to provide First Time Home Buyer with up to 10% towards their purchases
- CMHC to provide up 10% to first time buyers, in exchange for equity in home. This essentially provides up to 10% down payment towards home purchases.
- This initiative is not a replacement of your down payment, instead it's a payment free loan, on top of the down payment required, towards the purchase.
- CMHC will match up to 5% on resale homes and 10% on newly constructed homes.
- CMHC would take an EQUITY stake in the buyer’s home for the amount contributed.
Example would be purchase of new $500,000 home
- Minimum allowed down payment of 5% = $25,000 and the Mortgage loan would have been $475,000.
- Now CMHC will provide $50,000 (10% of the price as equity stake).
- The Mortgage loan taken is now, reduced by that $50,000 to $425,000 (helping reduce monthly payments by, approximately, $250 per month).
- The Mortgage loan is paid back upon sale of the home or sooner, if the Buyer wishes.
- Income below $120,000 per year per household.
- Home purchase limit of $505,000.
RRSP Withdrawals increase from $25,000 to $35,000
- Now First Time Buyers can withdraw up to $35,000 from their RRSPs towards a home purchase.
- Payback is from 3 to 15 years, with years 1 and 2 as grace periods of non-repayment.