In her latest pre-budget announcement on April 11, Deputy Prime Minister and Finance Minister Chrystia Freeland unveiled in Toronto initiatives to address housing unaffordability, which will be rolled out on April 16, 2024, as part of the next federal budget.
“What we are announcing today will make a down payment much more attainable for younger Canadians, and by extending amortization, monthly mortgage payments will be more affordable for young Canadians who want that first home of their own,” Freeland said in a statement.
Chrystia Freeland, deputy prime minister and finance minister
“Increasing the limit means that first-time homebuyers will be able to use the tax benefits of RRSP contributions to save up to $25,000 more for their down payment — in recognition of the fact the size of a down payment and the amount of time needed to save up for a down payment are much larger today," the federal government said. “The enhanced Home Buyers’ Plan will work in tandem with the government’s Tax-Free First Home Savings Account (FHSA) which allows Canadians to contribute up to $8,000 per year, and up to a lifetime limit of $40,000, towards their first down payment.”
Freeland said more than 750,000 Canadians have opened an FHSA. Notably, the Home Buyers’ Plan broadly defines “first-time” buyers as those who did not, at any time in the current calendar year before the withdrawal from the RRSP (except the 30 days immediately before the withdrawal) or at any time in the preceding four calendar years, live in a qualifying home (or what would be a qualifying home if located in Canada) “as your principal place of residence that either you owned or jointly owned, or your current spouse or common-law partner (at the time of the withdrawal) owned or jointly owned.”
The measures would also allow 30-year insured mortgage amortizations for “first-time” homebuyers purchasing newly built homes, effective Aug. 1, 2024, with a view to encouraging new housing supply and enabling more Canadians to afford their monthly mortgage payments.
The measures include “an expectation” in “enhancements to the Canadian Mortgage Charter ... that, where appropriate, permanent amortization relief will be made available to protect existing homeowners that meet specific eligibility criteria,” the federal government said. “Amortization relief means eligible homeowners can reduce their monthly mortgage payment to a number they can afford, for as long as they need to. ‘Amortization’ refers to the length of time a homeowner has to repay their mortgage; amortization relief can lower mortgage payments by stretching out this length of time. Thanks to permanent amortization relief, those homeowners who are most at risk are now better positioned to stay in their home and retain control over these important life decisions.”
These will all enable Canadians who withdraw from their Home Buyers’ Plan between Jan. 1, 2022, and Dec. 31, 2025, to have their repayment grace period extended by three years — that is, they would have up to five years before they need to start repayment.
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