On April 11, 2024, Deputy Prime Minister/Finance Minister Chrystia Free land outlined a number of new measures on housing affordability to help prospective home buyers with their first purchase and current homeowners.

Given the federal restrictions last year on foreign home buyers, one wonders if there is anything in store for first-time house or Newcomer to Canada with these newly announced 1st buyer housing affordability measures. 

Discussed below is how policies that result in an increased RRSP withdrawal limit and lengthened mortgage terms can help this action, providing an easier pathway for newcomers to Canada to buy their first home.

A non-Canadian, including those who are temporary residents of Canada, such as foreign workers and international students, could be eligible to acquire a residential property in Canada. 

Strategic Withdrawal: Maximising Your RRSP Savings with the New Limits

First-time home buyers would be, effective April 16, 2024, allowed to take out more money from their Registered Retirement Savings Plan to force a down payment for their first home.

Specifically, after the change comes into force, it will be $60,000 first-time home buyers across Canada can withdraw and put toward their down payment on the property they are purchasing, as opposed to a previous allowable withdrawal limit of $25,000 more. First-time home buyers were entitled to withdraw only $35,000 from their RRSP for a down payment on a home prior to April 16.

According to Minister Freeland, increased RRSP withdrawal limits “plus the Tax-Free First Home Savings Account* [FHSA], can be combined.” Together, Freeland says, these initiatives “will give younger Canadians more tools to save what is actually needed” to purchase their first home.

Increased Registered Retirement Savings Plan withdrawal limits

Effective April 16, 2024, First-Time Home Buyers will be able to withdraw more money from their Registered Retirement Savings Plan (RRSP) to make a down payment on their first home.

Specifically, after the change takes effect, first-time home buyers across Canada will be able to withdraw $60,000 to put towards a down payment on the property they are purchasing, an increase of $25,000 from the previous allowable withdrawal limit. Before April 16, first-time home buyers could only withdraw $35,000 from their RRSP for a down payment on a home.

According to Minister Free land, increases RRSP withdrawal limits “plus the Tax-Free First Home Savings Account* [FHSA], can be combine.” Together, Free land says, these initiatives “will give younger Newcomer to Canada more tools to save what is actual needs” to purchase their first home.

*More on FHSAs below.

In other words, the government’s decision to increase RRSP withdrawal limits is expect to allow Canadians, including eligible Newcomer to Canada, to access more money they can use for a down payment, easing the initial financial burden of purchasing a home in Canada.

Canada’s tax-free FHSA

In 2022, the Canadian government introduced a new savings account called an FHSA. This tax-free savings account enables Canadian citizens and permanent residents to save up to $8,000 per year towards their first home. This account is unique because it allows eligible account holders to enjoy several tax-related benefits while they save up to buy their first home in Canada such as:

• Contributions made to an FHSA are tax-deductible and they provide account holders with tax rebates
• Growth that occurs with all money that is contributing to an FHSA is tax-free
• When an account holder decides they are ready to withdraw from their FHSA for a down payment on their home, the money taken out of this account does not incur taxes

Note: Tax-free FHSAs have a lifetime contribution limit of $40,000.

Extended RRSP repayment period

According to the Canadian government, Canadians with an RRSP, including newcomers, will soon have more than twice as long as they once did “to start repaying their RRSP contributions [after making] a withdrawal to pay for the deposit on a home.”

Specifically, according to Minister Freeland, “first-time home buyers who withdraw money from their RRSPs [by] Dec. 31, 2025, will now have five years to begin repayments.” Before the extension of this repayment period, Canadians and newcomers with an RRSP had just two years before they needed to begin repaying their contributions.

This extension is expect to enable eligible account holders to have an increased level of financial flexibility when it comes to repaying their RRSP, something that will be beneficial both in the short term and for long-term budget planning for new homeowners.

Extended amortisation period for mortgages

Beginning on August 1 this year, some* first-time home buyers with insured mortgages “will get 30 years to pay [their] mortgage back”, according to the Canadian government.

Note: First-time homebuyers will be eligible for this extended amortisation period only if they purchase a newly built home.

Longer mortgage amortization periods have a positive impact on home Owners in Canada because they reduce the monthly payments that homeowners need to make on their property.

Therefore, this initiative is expect to, in the words of Minister Free land, make it possible for “more younger Canadians [to] afford to pay that monthly mortgage on a new home”. Ultimately, this should, in turn, generally make home Ownership more accessible for younger Canadians across the country. This may also benefit newcomers who typically immigrate to Newcomer to Canada as young adults.

Changes to the Canadian Mortgage Charter

The Canadian government updated its Canadian Mortgage Charter this fall, an update that will especially serve to benefit Newcomer to Canada & other “vulnerable borrowers.”

A summary of the government’s most recent Charter update is available below.

According to a recent article from CBC News, in line with the new Mortgage Charter update:

• Banks will now be requires to “reach out to Newcomer to Canada four to six months in advance of their mortgage renewal date to inform them of affordability options”
• Lenders will now have to contact borrowers “up to 24 months in advance of a homeowner’s mortgage renewal to discuss options”
• Lenders must* now “provide temporary extensions on the amortization period for mortgage holders who were facing financial difficulties.”

*It is important, the temporary extension measure “Is now being made permanent … depending on a home Owner’s circumstances” According to Canada’s Deputy Prime Minister/Finance Minister. Free land also said that this new update may even apply to “people with insured mortgages and making that change will not come with any extra fees or penalties.”

Further to the above, according to the same CBC News article, the government has announced that the following Charter updates will assist “vulnerable borrowers under financial strain”:

• Waiving fees and costs that would otherwise have been charge for mortgage relief measures
• Waiving interest on interest when mortgage relief measures result in mortgage payments that fail to cover interest payments on a loan
• Insured mortgage holders will be exempt from “re-qualifying under the stress test when switching lenders at the time of a mortgage renewal”
• Borrowers will be allow “to make lump sum payments to avoid negative amortization or sell their principal residence without incurring prepayment penalties”

Homeowners should now have more time to plan for their financial future through the extended notice periods imposed on banks and other lenders. In addition, certain people are expects to see some fees and interest payments waived and housing may now become more affordable through extended amortization periods.