The Canadian federal government announced significant changes to the Home Buyers’ Plan (HBP) in the 2024 budget, aiming to make home ownership more accessible for first-time home buyers amid rising home prices and living costs.
The main changes include:
Increased RRSP Withdrawal Limit: The limit for withdrawals under the HBP from Registered Retirement Savings Plans (RRSP) has been increased from $35,000 to $60,000. This change allows first-time home buyers to access more of their saved funds tax-free for down payments, provided these are repaid within 15 years.
Extended Repayment Grace Period: The government has extended the grace period for repaying the HBP withdrawals. Now, home buyers who withdraw between January 1, 2022, and December 31, 2025, will have up to five years before they need to start repayments instead of the current two. This extension is designed to give new homeowners more financial flexibility as they adjust to the costs of home ownership.
30-Year Mortgage Amortizations (for insured mortgages): Additionally, the 2024 budget introduces the option for first-time home buyers purchasing newly constructed homes to opt for mortgage amortizations up to 30 years. This measure, effective from August 1, 2024, aims to lower monthly mortgage payments, making home ownership more affordable and encouraging the construction of new homes.
If you are a first-time home buyer you should also consider opening a Tax-Free First Home Savings Account (FHSA), which was launched to help Canadians save for their first home with tax-free growth and withdrawals. This program allows you to contribute up to $8,000 annually, (up to 40,000) for which you receive an income tax deduction.
Talk to your Foster & Associates advisor about how best to take advantage of all available government programs for first-time home buyers.
Disclaimer: This article is for general information purposes only, and is not legal, financial, or tax planning advice. Everyone’s situation is unique, and this article cannot apply to every person. The reader should not take any action, or refrain from taking any action, as a result of this article without first obtaining legal or professional advice.
