The Federal Government has recently loosened the rules on mortgages to help new home buyers get into their first home. Here is a summary of the new changes:
Increased the $1 million price cap for insured mortgages to $1.5 million.
Increased amortizations to 30-year for first-time home buyers and to buyers of new builds (previously 25 years max).
To be considered a first-time homebuyer, a borrower must meet one of the following criteria:
the borrower has never purchased a home before;
in the last four years, the borrower has not occupied a home as a principal place of residence that either they themselves or their current spouse or common-law partner owned; or,
the borrower recently experienced the breakdown of a marriage or common-law partnership.
To be considered a new build, the new home must not have been previously occupied for residential purposes.
Examples:
John and Frank were previously pre-approved for $440,000 with 25-yr amortization. With 30-yr amortization, they’ll now be pre-approved for $470,000.
Difference in payments for a $500,000 home with 5% down:
25-yr amortization: $2,609/month
30-yr amortization: $2,365/month
NOTE: THE OVERALL COST OF THE MORTGAGE FOR 30-YR WILL BE ~$75,000 MORE THAN 25-YR!
There are also a number of other Federal and Provincial home ownership programs that we would be happy to discuss with you.
Tax-Free First Home Savings Account:
contribute up to $8,000 per year, to a lifetime limit of $40,000, towards your first down payment. Tax-free in and tax-free out.
Registered Home Buyers’ Plan:
withdraw up to $60,000 from your RRSP to buy or build a home.
PEI’s Down Payment Assistance Program (DPAP):
interest free loan of up to five per cent of the purchase price of a home, to a maximum loan of $17,500.
PEI’s Closing Cost Support Program:
receive up to $2,500 to support the closing costs of your home purchase.
PEI’s Land Tax Exemption:
As first time home buyer, you could be exempt from paying 1% land transfer tax.
PEI’s Rent-to-Own Pilot Program:
Many criteria (contact us).
