To guarantee an affordable access to property to Canadians, the federal government sets up a new incentive for first time homebuyers. This measure is an addition to the National Housing Strategy and is a complement to other incentives voted at the beginning of the year, aiming to enable access to home ownership for 100,000 middle-class households.
Which form will take this incentive? Who will be eligible? How to reduce your mortgage costs?
Helping first time buyers
Starting from 2nd September 2019, around 100 000 families in Canada (statistics from the Minister Responsible for the Canada Mortgage and Housing Corporation Authority) will be able to apply to the first time homebuyer incentive.
This measure aims to help middle-class households, whose admissible annual revenues do not exceed $120,000, to reduce their monthly mortgage payment, without increasing their financial burden. The Canadian government allocated $1.25 billion to this program over 3 years.
Households gathering the minimum required fund will be able to subscribe to a mortgage and ask the Canadian government to finance part of the mortgage in a participative way.
This new measure will be of 5% for existing property and between 5 and 10% for new ones, free of interest and refundable either after 25 years or after selling the property.
What are the advantages and the conditions?
This new incentive will enable people with the minimum required funds to obtain a mortgage insured by CMHC, Genworth or Canada Guaranty to have a financial participation from the Government of Canada, under admissibility criteria :
- The first time homebuyer will have to reimburse the incentive within 25 years or after selling the property. The reimbursement does not need to be periodical and the borrower will be able to refund the amount any time, without penalties.
- The government participates in the valuation or depreciation of the property’s value.
- The household annual admissible revenues must not exceed $120,000 and the mortgage must not be more than 4 times the annual revenue.
The major aim of this measure is also to support the growth of construction programs. Indeed, by setting up an incentive up to 10% for new houses, against 5% for existing ones, the Canadian government hopes to support the construction of new properties and increase the vacancy rate of some cities, hit by an important housing crisis.
Other measures to access ownership
Since the beginning of the year, the Government of Canada is taking various measures to enable an affordable access to home ownership for Canadians. Indeed, in march 2019, the maximum withdrawal amount free of charge from a Registered Retirement Savings Plan (RRSP) has been increased of $10,000, enabling to withdraw $35,000 per year, free of taxes.
These two incentives are part of the National Housing Strategy (NHS) of the Government of Canada, a program of $55 billion over 10 years that aims to increase the housing offer as well as to develop the renewal of 300,000 others.
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