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The federal government has discontinued the First-Time Home Buyer Incentive, a much-criticized program aimed at improving housing affordability for new buyers that saw muted uptake in major markets.

Canada Mortgage and Housing Corporation (CMHC), the national housing agency, said in a statement on its website that the program was winding up, with no new or updated submissions to be accepted after midnight ET on March 21.

Applications resubmitted after that date will be subject to a manual review, with review requests to be submitted no later than midnight ET on March 25 and no new approvals to be granted after March 31.

Introduced in 2019, the Incentive was aimed at reducing monthly mortgage payments for qualified first-time buyers through a shared-equity scheme. It offered a contribution of 5% or 10% towards the purchase of a newly constructed home, and 5% of the purchase of a resale existing home or new/resale mobile or manufactured home.

Still, that shared-equity component, which meant the government would also benefit from the potential future sale of a home, proved unpopular with buyers, who would have to repay the Incentive either after 25 years or upon sale.

The program faced challenges from the off. In 2020, federal Conservative MPs Tom Kmiec and Stphanie Kusie slammed its cost and low levels of consumer interest, urging CMHC to topdeo the scheme,  after an annual report showed its uptake lagged far below projections.

Mortgage Professionals Canada (MPC) also criticized the Incentive at its 2022 summit, when vice chair Veronica Love said the scheme was “simply failing” with data showing participation in the program was less than a third of what the government had originally envisaged.

Between its launch in September 2019 and the end of March 2021, the program had seen  LESS THAN 10,000 sucessfull applicants across Canada with Edmonton and Calgary accounting for nearly 2,000 of that total.


Learning about the new First Home Savings Account (FHSA) program
 May 15 2023     Posted by John C Filice

With the market starting to stabilize, and in many markets housing prices starting to rise again, maybe you or someone you know is looking at purchasing their first home before home prices rise too much. Canadians are realizing that we are unlikely to ever see interest rates like we did during COVID, and that the housing market is unlikely to correct much further given Canada's current economic forecasts, which has given buyers the nudge they need to re-enter the market. If you or someone you know is considering this, there's some good news. The federal government has recently introduced a new program to help first-time home buyers save for their dream home: the First Home Savings Account (FHSA).

The FHSA is a registered plan that allows you to save up to $40,000 in a tax-free account for your first home purchase. The plan allows you to contribute up to $8,000 per year and deduct your contributions from your taxable income, just like an RRSP. You can also carry-forward unused contribution room into the following year, just like an RRSP. Any interest accumulated inside the plan is tax-free and when you are ready to buy your first home, you can withdraw your savings tax-free, just like a TFSA. While $40,000 may not seem like nearly enough for a downpayment in many markets, there are also additional programs that you can leverage and every penny counts towards getting you that first home.

The FHSA can complement the existing Home Buyers' Plan (HBP), which allows you to withdraw up to $35,000 from your RRSPs to buy or build a qualifying home. You can use both programs together to boost your savings and reduce your taxes. The reduction in taxes can make saving to max out these programs easier, and is an important part of the program.

To be eligible for the FHSA, you must meet the following conditions:

    You must be a resident of Canada and at least 18 years old.
  • You must not have owned a home or lived in a home owned by your spouse or common-law partner in the past four years.
  • You must have a written agreement to buy or build a qualifying home for yourself or for a related person with a disability.
  • You must intend to occupy the qualifying home as your principal residence within one year of buying or building it.

If these criteria sound like someone you know, give me a call and we can discuss and plan for how these programs can be leveraged to get them into a new home. You can open an FHSA at any time now, and start reaping the tax benefits. If you are interested in learning more about the FHSA and how it can help give me a call today.

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