The Federal Budget was released this week and the early results are mixed. Due to a severe lack of sales activity, borrowers were hoping for some relief of the B-20 Guidelines and the stress test. The budget announced two changes that relate to mortgage financing.
THE FIRST-TIME HOMEBUYER INCENTIVE (FTHBI)
The new program is aimed at first-time homebuyers, particularly millennials, who are finding it difficult to enter the market. Starting in September 2019, the program will be available with these noted conditions:
- A CMHC loan of 5% of your downpayment for the purchase of existing homes, or 10% for the purchase of a newly built home
- The mortgage must by default insured
- Your household income must be less than $120,000 to qualify
- The insured loan plus insurance premiums cannot be more than 4 times the participant’s income (Max $480K mortgage; not much help for Vancouverites)
- No monthly payments are required, but the loan can be repaid anytime or upon the sale of the home
INCREASE OF RRSP WITHDRAWAL LIMIT TO $35,000
The Home Buyer’s Plan is not new, all that was done was raising the amount to be withdrawn. The previous limit was $25,000 per person which has now increased to $35,000. Some highlights include:
- Maximum $70,000 combined household limit for first-time homebuyers
- Currently only available for first-time homebuyers
- Starting in 2020, this program will be eligible for those who have split from their spouse or common-law partner
- The funds must be repaid within 15 years or there will be tax consequences
The early sentiment is these aren’t major game changers. A similar homebuyers program was offered in British Columbia a few years ago but had very little success. The program has since been closed due to lack of participation.
Currently, only about 10% of people use their RRSPs to fund their downpayment. An industry veteran, Ron Butler noted “The RRSP withdrawal limit change is a nothing burger since it was only being used less than 10% of the time for down payment, so essentially meaningless.”
If you or anyone you care about has any questions about the Federal Budget or mortgages in general, please reach out to me anytime at 778-558-5159.