AFFORDABLE HOMES FOR NEWCOMERS
Real estate law
19 Feb
The Deputy Prime
Minister and Finance Minister introduced a range of new measures aimed at
improving housing affordability for first-time buyers and existing homeowners.
Given last
year's federal restrictions on foreign home buyers (more on that in a bit),
newcomers to Canada might be wondering if they qualify for any of the newly
announced housing affordability measures—or if they should just keep scrolling
through real estate listings while dreaming of a home with a moat and
drawbridge.
The new policies
raising RRSP withdrawal limits and extending mortgage terms are like a welcome
mat for newcomers
to Canada. They make it easier to buy that first home—so you might finally
be able to swap your tiny apartment for a place with enough room to finally
stretch out without elbowing your toaster.
They've offered
a straightforward explanation of what these changes entail and how newcomers,
particularly temporary
residents like international students and foreign workers, can take
advantage of them.
The Canadian
government implemented the Prohibition on the Purchase of Residential Property
by Non-Canadians Act, restricting foreign buyers from acquiring residential
properties in Canada.
This policy,
which just got an extension, is designed to keep “non-Canadians” from snapping
up residential properties—defined as buildings with 3 or fewer dwelling units,
including those charming semi-detached houses and cozy condos. So, if you’re
thinking of buying a Canadian home, you might want to leave your ice skates and
poutine cravings at home for now.
Non-Canadians
are defined as “those who are not Canadian citizens or permanent residents”.
But in some cases, non-Canadians, including temporary residents like foreign
workers and international students, might still qualify to buy residential
property in Canada.
There are
certain exceptions where non-Canadians can still buy residential property in
major population centers. These include situations where a non-Canadian
acquires property through divorce, separation, gift, or inheritance; when they
rent and occupy a dwelling unit, as renting does not count as purchasing; if a
creditor enforces a security interest, such as through foreclosure; or when a non-Canadian
buys property for development purposes.
First-time
homebuyers can now dip a bit deeper into their Registered Retirement Savings
Plan (RRSP) to help with their down payment—because apparently, your retirement
savings can also double as a home-buying fund.
Starting with
the new changes, first-time homebuyers across Canada can now pull out $60,000
from their RRSP for a down payment—up from the old $35,000 limit. So, you might
just be able to afford that cozy place with a slightly less cramped closet, and
your retirement fund won’t be quite as envious.
Increased RRSP
withdrawal limits plus the Tax-Free First Home Savings Account [FHSA], can be
combined. Together, these initiatives will give younger Canadians more tools to
save what is actually needed to purchase their first home.
In 2022, the
Canadian government introduced the FHSA, a tax-free savings account designed to
help people save up to $8,000 a year for their first home. The FHSA offers
several tax benefits: contributions are tax-deductible, any growth in the
account is tax-free, and withdrawals for a down payment are also tax-free. Just
keep in mind that the FHSA has a lifetime contribution limit of $40,000.
By combining the
increased RRSP withdrawal limits with the Tax-Free First Home Savings Account
(FHSA), younger Canadians will have more resources to save up for their first
home. These measures provide additional tools to help cover the actual cost of
purchasing a property.
In simpler
terms, by increasing RRSP withdrawal limits, the government is allowing
Canadians, including eligible newcomers, to tap into more funds for a down
payment. This should ease the initial financial strain of buying a home in
Canada—think of it as trading in your piggy bank for a veritable treasure
chest.
The Canadian
government has announced that Canadians with an RRSP, including newcomers, will
now have over twice the time they previously had to begin repaying their RRSP
contributions if they use them for a home deposit. This means that after
withdrawing funds from their RRSP to help with a down payment on a home, they
will have a longer period to return the money to their account, making it
easier to manage their finances and reduce the immediate impact on their
savings.
First-time
homebuyers who take money out of their RRSPs now get a whole five years to
start paying it back. Before this change, Canadians and newcomers had just two
years to start repaying. So, you now have a bit more time to settle in and
enjoy your new home before your RRSP starts giving you the side-eye.
This extension
should give eligible account holders a lot more wiggle room when repaying their
RRSP, making it easier to handle their finances. It’s like giving new
homeowners a bit more breathing space for short-term expenses and long-term
budgeting—because who wouldn’t appreciate a little extra time to adjust to
their new home’s quirky charm.
Some first-time
homebuyers with insured mortgages will have 30 years to pay off their mortgage,
as per the Canadian government. This longer repayment period is available only
if they buy a newly built home.
Longer mortgage
amortization periods are like a financial breath of fresh air for homeowners in
Canada. They help lower those monthly payments, making it a bit easier to
manage your budget—so you can spend less time stressing and more time enjoying
your new home.
This change is
designed to make it easier for younger Canadians to handle their monthly
mortgage payments on a new home. By extending the time they have to repay their
mortgage, this initiative should make homeownership more affordable and
accessible for younger people throughout the country. This also means that
newcomers, who often come to Canada as young adults, might find it easier to
buy their first home here. Overall, the idea is to help more young people and
newcomers achieve the dream of owning a home.
A new program
known as the Canadian Mortgage Charter. Under the Canadian Mortgage Charter,
banks are set to provide more flexible support for mortgage holders. This
includes allowing temporary extensions on repayment periods, waiving fees for
mortgage relief, and letting insured mortgage holders switch lenders at renewal
without re-qualifying under the stress test.
Banks will also need to reach out to
homeowners four to six months before renewal to discuss affordability options,
permit lump sum payments to prevent increased debt, and let borrowers sell
their home without extra penalties. Additionally, they will waive interest on
unpaid interest when relief measures result in insufficient payments.
Homeowners now
have a bit more breathing room to sort out their financial plans, thanks to the
longer notice periods banks and lenders are required to give. Plus, some lucky
folks might get a break on fees and interest payments, while the extended amortization
periods could make housing feel a little more budget-friendly—so you might have
more to spend on the fun stuff, like decorating your new home.