New Home Buyers’ Plan and amortization updates aim to help future buyers

Big news has come from Ottawa recently, as the federal government announced new changes to help home buyers enter the market. These changes impact the Home Buyers’ Plan, RRSPs, and amortization periods for certain home owners. The question is, can any of these changes help you? Here’s what you need to know about the updated regulations.

What are the changes?

The new regulations surrounding RRSPs and the Home Buyers’ Plan are significant. Under the Home Buyers’ Plan’s current rules, borrowers can withdraw up to $35,000 from their Registered Retirement Savings Plan (RRSP) to use towards the purchase of a home. Individuals can make these withdrawals tax-free, and pay it back over the course of 15 years. Now, borrowers are able to take out up to $60,000. This near-doubling of the limit will likely have huge impacts on future home buyers who need a boost with some tax-free contributions. Additionally, participants can now wait up to five years to start their repayment process, up from two.

Another change involves the amortization periods of insured mortgages. An insured mortgage is one for a home under $1 million, and with a down payment below 20 per cent. As of August 1, first-time home buyers can access a 30 year amortization when they purchase a newly-built home that falls under these requirements. The goal is to reduce the cost of monthly mortgage payments by stretching them out over a longer period of time. It is important to note that this could result in higher interest costs in the long run. However, it offers a boost to home buyers in the short term.

How does this impact you?

The impact of these new moves will depend on your location and situation. For example, new home buyers will benefit from the possibility of a 30 year amortization period, whereas repeat buyers cannot. Similarly, property prices in regions such as the Greater Toronto Area often fall above $1 million, meaning buyers in this area are less likely to enjoy this option. The good news is the Home Buyers’ Plan changes apply to all home buyers. People with an RRSP can now access much more to contribute towards their future home purchase.

All of these changes come about one year after the federal government introduced the First Home Savings Account. This product permits new home buyers to set aside up to $40,000 that they can use to help buy a home. This money is tax-free and does not need to be paid back. As housing affordability remains a hot issue and many would-be home owners are shut out of the market, the government’s actions will hopefully help attract new buyers. 

Helping new home owners, and repeat buyers, enter the market is a key part of how a mortgage broker operates. We are committed to getting you into a home you love, with the mortgage product you deserve. If you are hoping to purchase a home in the future, this is the perfect time to take action.

If you have any questions about your mortgage, get in touch with us at Clinton Wilkins Mortgage Team! You can call us at (902) 482-2770 or contact us here.