2019 will shape up to be the best years in a long time if you’re a first-time homebuyer. Inventory levels are excellent; prices are soft and are off their 2-year highs and interest rates remain at all-time lows. As we speak, you can lock in a 5-year rate still at 40-year lows. The biggest hurdle for most first-time buyers, though, is the down payment – that 5% for properties valued up to $500,000.
The 2019 federal budget included a $10,000 increase in the federal Registered Retirement Savings Plans (RRSP) Home Buyers Plan. It allows first-time homebuyers to now borrow up to $35,000 per person ($70,000) couple — interest-free and penalty-free —from your/their RRSP. Unlike other government programs, the HBP doesn’t have many qualifications, red tape, or fine print attached to it. Essentially:
- You must not have owned a property within the last 5 years
- You are a permanent resident of Canada
- You are purchasing as your principal residence.
Starting in 2020, a new rule will allow someone who has owned a home previously but has suffered a marriage break down or separation in the last four years to still take advantage of the RRSP withdrawal plan. A full year grace period is given before you have 15 years to pay the money back in order to avoid full ordinary income taxation on the HBP withdrawal.
The federal budget also included a first-time homebuyer incentive that will allow those who have the minimum down payment for an insured mortgage to finance a portion through a shared-equity mortgage with the Canada Mortgage and Housing Corp.
As a first-time buyer, you are also exempt from the Property Purchase Transfer Tax which is a tax that is calculated at 1% of the first $200,000 and 2% of the remainder of the purchase price, only as long as the property purchase price is below $500,000. Since 2016, the provincial government allowed the Property Transfer Tax to be waived for newly built homes, condos or townhouses under $750,000. That could lead to $13,000 in savings, but only if you are a Canadian or permanent resident and live in the home for at least a year.
Click here to learn about the other great perks available to you as a first-time homebuyer.
