The government unveiled a new incentive program as part of the new budget that should provide some relief to young home buyers looking to make the transition from renting to owning.
With economic conditions struggling and purchasing a home becoming increasingly more difficult for first-time home buyers, the real estate industry has been advocating for government assistance, and some even suggesting the need for relaxing the mortgage stress test, which requires borrowers to prove they can afford payments on a mortgage with interest rates 2 percentage points higher than the current Bank of Canada Rate.
According to reports, the $1.25 billion incentive program provides prospective buyers who have the minimum down payment for a home and also have a household income under $120,000 an opportunity to finance between 5 and 10 percent o their mortgage via a shared equity program through Canada Mortgage and Housing Corporation. (CMHC).
In addition, the government is also increasing the amount first-time home buyers can withdraw from their Registered Retirement Savings Plan (RRSP), from $25,000 per individual to $35,000, or up to $70,000 per couple. That limit hasn’t been adjusted for 10 years.
Those behind the incentive program are hoping the new legislation will pass by September, just in time for the fall market.