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Announcements for First Time Home Buyers – 30 years amortization and RRSP Withdrawl limit Increase to $60k

Government to allow 30-year amortization for first-time buyers’ mortgages on new homes.

The Canadian government announced that it would allow first-time homebuyers to extend their mortgage amortization period to 30 years for insured mortgages on new homes, up from the current limit of 25 years. This change is part of the government's efforts to make homeownership more accessible, especially for young Canadians struggling with high housing prices. The longer amortization period can lower monthly mortgage payments, making them more affordable for first-time buyers. However, it's important to note that longer amortization periods can also mean paying more interest over the life of the mortgage. The new rules apply specifically to insured mortgages, which are mortgages where the borrower pays a premium to protect the lender in case of default. This requirement is typically imposed when the borrower makes a down payment of less than 20% of the home's purchase price. It's important for first-time buyers to carefully consider their financial situation and consult with a mortgage professional to determine if a 30-year amortization is the right choice for them.

Registered Retirement Savings Plan (RRSP) Withdrawl Limit Increase to $60,000

The government also announced an increase in the maximum amount that first-time homebuyers can withdraw from their Registered Retirement Savings Plan (RRSP) to buy a home. The previous limit was $35,000, and it has been raised to $60,000, effective for withdrawals made after March 19, 2019. This means that eligible first-time homebuyers can withdraw up to $60,000 from their RRSPs to put towards the purchase of a home, without having to pay tax on the withdrawal. This increase in the withdrawal limit is intended to help Canadians, particularly young people, achieve their goal of homeownership in the face of rising housing costs. To qualify as a first-time homebuyer, you must meet certain criteria, including not having owned a home as your principal residence in the four-year period before the withdrawal is made. The withdrawn funds must also be used to buy or build a qualifying home for yourself or a related person with a disability. It's important to note that the RRSP withdrawal is considered a loan and must be repaid over a period of up to 15 years, starting in the second year after the withdrawal is made. If the required repayment is not made in a given year, that amount is added to your taxable income for that year. As with any financial decision, it's advisable to consult with a financial advisor or tax professional to understand the implications of an RRSP withdrawal and how it fits into your overall financial plan. Contact Jaspreet Bansal, Mortgage Professional at 204-998-1636 for more details.  

Published April 12, 2024