Purchasing a home is a significant milestone, especially for first-time home buyers. In Canada, several recent changes and incentives have made it easier for new buyers to enter the housing market. Here’s a breakdown of the latest updates that first-time home buyers in Canada should be aware of.
30 Year Amortization
As of December 15, 2024, all first-time home buyers in Canada will be able to extend their mortgage amortization period to 30 from the previous maximum of 25, regardless of whether they’re an insured or uninsured borrower. This change will help to reduce the cost of monthly mortgage payments and help more Canadians buy a home.
Increasing the $1 million price cap for insured mortgages to $1.5 million
Effective December 15, 2024, to reflect current housing market realities and help more Canadians qualify for a mortgage with a downpayment below 20 per cent – this includes first time buyers. Increasing the insured-mortgage cap—which has not been adjusted since 2012—to $1.5 million will help more Canadians buy a home.
First Home Savings Account
The First Home Savings Account (FHSA) is a new type of savings account introduced in the 2022 federal budget, which became available on April 1, 2023. It blends features from both TFSAs (Tax-Free Savings Accounts) and RRSPs (Registered Retirement Savings Plans) but offers more benefits. Contributions to an FHSA are tax-free, and unlike with RRSPs, there’s no requirement to repay the funds withdrawn for purchasing your first home.
You can contribute up to $8,000 per year to the FHSA, with unused contribution room carrying over to future years, up to a lifetime maximum of $40,000. If both partners are saving for their first home, each can have an FHSA, allowing a combined total contribution room of up to $80,000. Additionally, the FHSA can be used alongside the Home Buyers’ Plan when purchasing a home.
To withdraw funds from the FHSA, you must have an agreement to buy a home. If not, the funds can be transferred to an RRSP without any tax consequences. The account can remain open for up to 15 years or until you buy your first home, but it must be closed within the same year as entering a purchase agreement.
Recent changes to the RRSP Home Buyers’ Plan
On April 11, 2024, the federal government announced that the withdrawal limit for the
RRSP Home Buyers’ Plan would be raised to $60,000, up from the previous limit of $35,000. This change took effect on April 16, 2024. It’s the second time the limit has been increased since the program was introduced in 1992, with the last adjustment made in 2019 when it was raised from $25,000.
Additionally, the new policy extends the repayment period for home buyers who make withdrawals through the HBP between January 1, 2022, and December 31, 2025, giving them five years instead of two before they need to start making repayments.
