Our take on the March Federal Budget Announcement for Grande Prairie Homebuyers
March 27, 2019. Our office has received a ton of questions about the March Federal Budget Announcement for Grande Prairie. This included incentitives planned for first-time hombuyers.
The only immediate change, is that first time buyers can use up to $35,000 in RRSP money for down payment, up from the previous $25,000 allowed. You will still need to re-invest this into an RRSP within a 15 year time frame. If you take out $35,00 that means you should put at least $2,333 back into your RRSP each year. Should you forget to return money to your RRSP, the goverment will have you pay tax for each forgotten portion.
First Time Home Buyer Incentitive
The second announcement by our federal government introduced the First-Time Home Buyer Incentive. The Canada Mortgage and Housing Corporation will provide first-time buyers up to 10% of the purchase price of a new construction home. They will also give 5% of the purchase price for a resale. There’s no clear plan for how you the borrower will be required to pay for the loan. This leaves many questions unanswered, and makes it impossible to predict the benefits of this incentive. It remains very unclear if the government will take an equity position in your home or if you would have an interest-free loan.
You need to understand how this loan will be repaid
For borrowers, understanding how this loan is required to be repaid is important. If the government is taking an equity stake in your home, the amount that you the homeowner would have to repay will grow as the value of your home increases. In this case, I question if this is a good thing for borrowers at all? Potentially you are giving up a lot of your equity at sale time.
DLC’s Economist, Dr. Sherry Cooper, had this to say about the budget announcement,
“It’s all about increasing demand for housing without doing much to increase supply, and you don’t need to be an economist to know that if you increase demand without increasing supply, you’ll end up with higher house prices, which is the oppose of the intention.”
Encouraging new construction would have been better
Rather than encouraging more buyers to compete for inadequate housing inventory, Cooper believes construction inducements would have been more beneficial.
“The government could have done things to increase supply, like changing the rules around zoning and the Greenbelt to open up more land,” she said. “They could even subsidize housing construction or eliminate some of the red tape and other delays in construction. There are other things that could have been done to incentivize the construction of new housing.”
The March Federal Budget Announcement for Grande Prairie has also placed limits on the First-Time Home Buyer Incentive:
- Maximum household income of $120,000
- At this time only purchase price’s below $400,000 will qualify.
These will further limit how useful this program is for you!
As we are made aware of updates to this announcement, we’ll let you know!