The Budget 2019 incentives for first-time home buyers drew a lot of attention when the federal budget arrived. The long-awaited budget came with a clear eye on First-Time Home Buyers (FTHBs), and many people asked me what it really meant for them.
This post was first published in 2019. The program details below are from the federal budget of that year.
Why the Budget 2019 incentives made headlines
I saw a flood of emails and ads about the First-Time Home Buyers’ incentive in the new federal budget of 2019. So, as usual, I want to bring you the real facts. That way, you can make a sound decision based on your own circumstances.
Yes, there are handsome new incentives in the budget for FTHBs. However, ads rarely tell the whole story. The Budget 2019 incentives came in two main parts: a shared equity program and a larger RRSP withdrawal. Below are the key points for your information and decision making.
The Shared Equity Mortgage behind the Budget 2019 incentives
Budget 2019 introduced the First-Time Home Buyer Incentive. It would allow eligible FTHBs to apply to finance a portion of their home purchase through a Shared Equity Mortgage.
So what is a Shared Equity Mortgage? The ownership and equity of the property are shared between you (the Borrower) and the Lender. Whenever you sell the property, you have to share the profit (and the loss, if any) with the Lender, in line with the portion of their investment. In other words, the money you borrow this way buys the Lender a share of your home.
- Eligible FTHBs would qualify for a 10% Shared Equity Mortgage on a newly constructed home.
- They would qualify for 5% on an existing (resale) home.
In practice, this is the heart of the program. A smaller main mortgage can mean lower monthly payments. On the other hand, you give up part of any future gain when you sell. That trade-off is worth thinking through before you sign.
Income limits under the Budget 2019 incentives
The Incentive would be available to FTHBs with household incomes under $120,000 per year. In addition, the participant’s insured mortgage plus the Incentive amount cannot be greater than four times the participant’s annual household income.
That means the total loan amount could be a maximum of $480,000, based on the maximum household income limit of $120,000.
For buyers in Mississauga and the rest of the GTA, this cap matters a great deal. Because prices here are higher than in many parts of Canada, the Budget 2019 incentives fit some homes far better than others. For example, a buyer may find the program suits a condo or a smaller townhome better than a detached house. So it helps to know your budget before you start looking.
RRSP withdrawals: the second of the Budget 2019 incentives
Another incentive is that FTHBs can now withdraw up to $35,000 from their RRSPs. Previously, the limit was capped at $25,000.
This change can help with a down payment, especially for couples who both have RRSP savings. Still, money you take out of an RRSP is money that is no longer growing for your retirement. Therefore, ask your financial adviser how a withdrawal fits your long-term plan. Any program works best when it matches your wider goals.
Is a shared equity mortgage right for you?
There is no single answer, and it depends on your situation. First, think about how long you plan to stay in the home. Next, think about whether you expect your income to grow. Finally, consider how you would feel about sharing any gain in value with the Lender.
Some buyers value lower payments today more than a larger gain later. Others would rather keep all of their equity. Either way, the Budget 2019 incentives are one tool among many. You may also find it useful to read my 10 essential steps for first-time buyers in Mississauga and my list of common first-time buyer mistakes to avoid.
Where to read the official budget details
The information above is from the federal budget documents. For more details on the Budget 2019 incentives, please visit the housing section of the budget:
Federal programs change over time, so always check the current rules on the Government of Canada website before you rely on them. I am also a call away to discuss your individual needs and how you can make the best use of the programs that apply to you.
Talk to a Mississauga real estate agent
Do you have questions about what this means for you? I am happy to help. Please send me a message or call me on my direct line at 416 908 5600. A. Q. Mufti, Sales Representative, RE/MAX Real Estate Centre Inc., Brokerage.
Disclaimer: this article was published on 18 January 2025 and reflects the information available at that time. Interest rates, prices, and government programs change, so check the current position before acting on anything here. It is provided for information only and is not financial, mortgage, tax or legal advice. A. Q. Mufti is a registered Sales Representative with RE/MAX Real Estate Centre Inc., Brokerage, Ontario, Canada.
