The Canadian federal government recently revealed some good news for first-time home buyers. After much urging from the real estate industry, the government has introduced measures that will help first-time buyers. These measures were introduced in the 2019 federal budget, and include a new incentive program for households making less than $120,000 annually. The action taken by the government will also allow buyers to draw more money out of their RRSPs, and includes a number of measures that look to boost the overall supply of real estate within Canada’s market.
New measures to lessen the burden on first-time home buyers
The recent announcement of the federal budget brought with it a number of pleasant surprises for first-time home buyers, especially those of which are looking towards hot markets like those found in Toronto and Vancouver. These buyers were previously seen as being “shut out” of hot markets, especially since the introduction of the mortgage stress test. While the new budget did not take measures to relax the mortgage stress test, it did introduce other measures that will help to offset its effect on first-time buyers.
The new incentive program featured in the federal budget will mean that first-time buyers who can afford to pay the minimum down payment on a home can apply to finance five percent of the value of an existing property, or ten percent for a newly constructed home through a shared equity program being offered by the Canada Mortgage and Housing Corporation (CMHC). The ten percent cap will apply only to homes that have been newly constructed, in an effort to increase supply in especially competitive markets like Toronto. The CMHC loan measures will have a cap of four times a recipients household income, with a maximum of $480,000.
The newly introduced measures will also allow first-time home buyers to borrow up to $35,000 per individual (up to $70,000 per couple) from their RRSPs. Prior to these measures, buyers could only borrow up to $25,000 from their RRSPs (or $50,000 per couple). First-time buyers will have up to 15 years in order to repay the money borrowed from their RRSPs. The Canadian government estimates that these newly introduced measures will benefit around 100,000 first-time home buyers over the next three years.
Some relief for first-time buyers looking towards the GTA
The new measures implemented by the federal government will provide some much needed relief for first-time buyers looking towards buying a condo in the Greater Toronto Area, as these properties averaged around $448,000 in February 2019 according to TREB. This means that now may be a great opportunity to look outside the downtown Toronto core and pull the trigger on a lower-priced condo in the GTA. First-time buyers hoping to take advantage of the new measures in order to purchase a detached or semi-detached property in downtown Toronto or the GTA may be out of luck, as these home prices average well above the $480,000 cap established by the CMHC loans. Regardless, the housing measures being implemented by the federal government is a positive for first-time home buyers, especially those looking at purchasing a property within their budget and below the CMHC cap.
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