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).

For more details on these changes and programs and how they could apply to you, please reach out to us at: info@finallyhomepei.ca