Federal Budget Proposal for First Time Buyers

I’m sure you’ve heard the news regarding the new Federal Budget proposal regarding First Time Homebuyer Program. I thought I’d shed light on what’s been developing.

As of March 19/19′, RRSP withdrawal limits have increased from $25,000 to $35,000 per person, or $70,000 per household. If you have been separated or divorced, you can now again access your RRSP tax free.

The bigger splash made by the Federal government, the CMHC incentive plan, will likely be in effect in the Fall. The proposal? CMHC will contribute 5-10% of your purchase price, lowering your monthly payments; Lending 5% of the purchase price on resale homes, and 10% on new build homes.

Scenario: On a $400,000 home, the buyer will have to come up with 5% or $20,000. Equalling a mortgage of $380,000, CMHC would kick in 10% or $40,000 bringing the loan down to $340,000. On a 3.5% mortgage rate, that equals savings of more than $2,700 / year.

There are a few proposed qualifications / stipulations for this program:
– Must be paid back to CMHC once either the home is sold or put up for rent. This is where I have a problem. The government has an equity stake of your home. If you were lent 10% of the home at time of purchase, you must pay back 10% of the current market value at the time of sale or rent. So if your home increases in value you are actually paying back more, however if it decreases, you will pay back less.
– Not eligible to buyers putting 20% down or more
– Maximum of $120k household income

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