On April 11, 2024, Deputy Prime Minister and Finance Minister Chrystia Freeland unveiled several initiatives aimed at making home ownership more attainable for first-time buyers, including newcomers to Canada. These measures are particularly timely given the recent federal limitations on foreign home buyers.
Understanding the Prohibition on Foreign Home Buyers
The Canadian government initiated the Prohibition on the Purchase of Residential Property by Non-Canadians Act on January 1, 2023, restricting non-Canadian citizens or permanent residents from purchasing residential properties, such as houses and condos. This act has now been extended to January 1, 2027. However, certain non-Canadians, like international students and foreign workers, might still qualify to buy homes under specific conditions.
Enhanced RRSP Withdrawal Limits
From April 16, 2024, first-time home buyers will benefit from increased withdrawal limits from their Registered Retirement Savings Plans (RRSPs). The limit has been raised from $35,000 to $60,000, providing substantial financial relief for down payments. Minister Freeland highlighted that this increase, combined with the Tax-Free First Home Savings Account (FHSA), will empower younger Canadians with more substantial resources to enter the housing market.
The Tax-Free First Home Savings Account
Introduced in 2022, the FHSA is a unique tool for Canadian citizens and permanent residents, allowing annual savings of up to $8,000 for a first home purchase. Contributions to this account are tax-deductible, and both the growth and withdrawals (for home purchases) are tax-free, capped at a lifetime limit of $40,000.
Extended RRSP Repayment Periods
The government is also extending the repayment period for RRSP withdrawals used for home purchases. First-time buyers who withdraw funds by December 31, 2025, will now have five years instead of two to start repaying the borrowed amount. This change is designed to give new homeowners additional financial breathing room.
Amortization Periods and Mortgage Flexibility
Starting August 1, eligible first-time homebuyers can opt for a 30-year amortization period on insured mortgages for newly built homes. This adjustment aims to lower monthly mortgage payments, making home ownership more accessible for the younger demographic and potentially benefiting newcomers who often move to Canada during their young adult years.
Updates to the Canadian Mortgage Charter
This fall, the Canadian Mortgage Charter received updates to support newcomers and other vulnerable borrowers. Banks are now mandated to proactively engage with homeowners about affordability options well ahead of mortgage renewals. Additionally, measures such as waiving certain fees and allowing penalty-free lump sum payments are expected to ease the financial pressures on homeowners facing challenges.
Navigating Your Home Buying Journey in Canada
For newcomers to Canada, understanding and leveraging these new policies can significantly ease the path to home ownership. By staying informed and prepared, you can navigate the complexities of buying your first home in Canada more smoothly.
Remember, these measures are designed to support your journey toward becoming a homeowner in Canada. Explore your options and take advantage of the resources available to fulfill your dream of owning a home in this welcoming country.
