Home Ownership Becomes Affordable For Newcomers In Canada 

On April 11, 2024, the Deputy Minister declared several measures so that home ownership becomes affordable for newcomers in Canada. 

In light of federal restrictions on foreign home buyers last year, newcomers to Canada might be curious if they are eligible for any of the recently declared housing affordability measures. 

This article outlines how home ownership becomes affordable for newcomers in Canada via different policies implementing increased RRSP withdrawal limits & extended mortgage terms that can benefit newcomers in Canada, thus making it easier to purchase their new home. 

Understanding Canada’s Restrictions On Foreign Home Buyers 

Enforced beginning on January 1, 2023, the Canadian government enacted the Prohibition on the Purchase of Residential Property by Non-Canadians Act. 

This government policy, which was recently extended until January 1, 2027, was put in place to restrict non-Canadians from buying residential property, semi-detached houses, & condominium units. 

Note that non-Canadians are those who aren’t Canadian citizens or permanent residents. 

Moreover, there are certain situations where non-Canadians, including temporary residents like foreign workers or international students, might still be eligible to purchase a residential property in Canada. 

Increased Registered Retirement Savings Plan Withdrawal Limits

Effective April 16, 2024, first-time home buyers can withdraw more money from their Registered Retirement Savings Plan (RRSP) to make a down payment on their first home. 

Specifically, after the change takes effect, first-time home buyers across Canada will be able to withdraw $60,000 to put towards a down payment on the property they are purchasing, an increase of $25,000 from the prior allowable withdrawal limit. Before April 16, first-time buyers could only withdraw $35,000 from their RRSP for a down payment on a house. 

According to Minister Freeland, increased RRSP withdrawal limits & Tax-free first-home savings accounts can be combined. Freeland further states that these initiatives will give younger Canadians more tools to save in order to purchase their first home. 

In simpler terms, the government’s decision to increase RRSP withdrawal limits will allow Canadians, including eligible newcomers, to access more money they can use for a down payment, easing the initial financial burden of buying a home in Canada. 

Canada Tax-Free FHSA

As home ownership becomes affordable for newcomers in Canada, let us discuss more about FHSA. 

In 2022, the Canadian government introduced a new savings account called FHSA; this tax-free savings account enables Canadian citizens & permanent residents to save up to $80,000 per year towards their first home. This account is unique because it enables eligible account holders to enjoy numerous tax-related benefits while they save up to buy their first home in Canada, such as: 

• Contributions made to an FHSA are tax-deductible & they provide account holders with tax rebates. 
• Growth that happens with all money that is contributed to an FHSA is tax-free. 
• When an account holder decides they are prepared to withdraw from their FHSA for a down payment on their home, the money taken out of this account doesn’t incur taxes. 

Note: Tax-free FHSAs have a lifetime contribution limit of $40,000. 

Extended RRSP Repayment Period 

According to the Canadian government, Canadians with an RRSP, including newcomers, will soon have more than twice as long as they once did to begin repaying their RRSP contributions after making a withdrawal to pay the deposit on a home. 

Particularly, according to Minister Freeland, first-time home buyers who withdraw money from their RRSPs by December 2025 will now have five years to begin repayments. Before the extension of this repayment period, Canadians & newcomers with an RRSP had just two years before they needed to begin repaying their contributions. 

This extension will enable eligible account holders to have an increased level of financial flexibility when it comes to repaying their RRSP, something that will be beneficial both in the short-term & for long-term budget planning for new homeowners.

Extended Amortization Period For Mortgages 

Beginning on August 1 this year, some first-time home buyers with insured mortgages will get 30 years to pay their mortgage back. 

Note: First-time homebuyers will be eligible for this extended amortization period if only they purchase a newly built home. 

Longer mortgage amortization periods have a positive impact on homeowners in Canada because they reduce the monthly payments that homeowners need to make on their properties. 

Therefore, this initiative will make it possible for younger Canadians to afford to pay that monthly mortgage on a new home. Ultimately, this must make homeownership more affordable for younger Canadians across the country. This might also benefit newcomers who typically immigrate to Canada as young adults.

Changes To The Canadian Mortgage Charter 

Homeownership has become affordable for newcomers in Canada. Moreover, the Canadian government updated its Canadian Mortgage Charter this fall, an update which will serve to the benefit of newcomers to Canada & other vulnerable borrowers. 

A summary of the government’s recent Charter update is available below. 

• Bank accounts will now reach out to homeowners four to six months in advance of their mortgage renewal date to inform them of affordable options. 
• Lenders will now have to contact borrowers up to 24 months in advance of a homeowner’s mortgage renewal to discuss alternatives. 
• Lenders must now grant temporary extensions on the amortization period for mortgage holders who are facing financial difficulties. 

Once temporary, the measure is now permanent, depending on a homeowner’s circumstances. Freeland also said that this new update might even apply to people with insured mortgages & making that change will not come with any extra penalty/ fee.   

Along with the updates mentioned above, the government has declared that the following Charter updates will assist vulnerable borrowers under financial strain: 

• Waiving fees & costs 
• Waiving interest on interest when mortgage relief measures cause mortgage payments to fall short of loan interest payments 
• People with insured mortgages will not have to requalify under the stress test when they move lenders for their mortgage renewal
• Borrowers will make lump sum payments to avoid negative amortization or sell their principal residence without incurring prepayment penalties

Homeowners should now have more time to plan for their financial future through the extended notice periods imposed on banks & other lenders. Moreover, certain people will see some fees & interest payments waived & housing might now become affordable through extended amortization periods.