On April 11, 2024, Deputy Prime Minister and Finance Minister Chrystia Freeland unveiled a series of new housing affordability measures aimed at assisting both first-time buyers and existing homeowners.
Given the federal restrictions imposed on foreign home buyers last year, newcomers to Canada may be wondering about their eligibility for the recently announced housing affordability measures.
This article details how policies such as increased RRSP withdrawal limits and extended mortgage terms can benefit newcomers to Canada, facilitating the purchase of their first home.
Understanding Canada’s restrictions on foreign home buyers
Enforced since January 1, 2023, the Canadian government implemented the Prohibition on the Purchase of Residential Property by Non-Canadians Act. This policy, extended until January 1, 2027, restricts non-Canadians—defined as individuals who are not Canadian citizens or permanent residents—from buying residential properties with three or fewer dwelling units. However, certain exceptions exist, allowing temporary residents like foreign workers or international students to still be eligible to purchase residential properties in Canada
Canada’s tax-free FHSA
Introduced in 2022, the Tax-Free First Home Savings Account (FHSA) offers Canadian citizens and permanent residents a tax-free avenue to save up to $8,000 annually for their first home purchase. This specialized account provides several tax advantages, making it an attractive option for eligible individuals aiming to accumulate funds for their inaugural home investment in Canada.
- Contributions made to an FHSA are tax-deductible and they provide account holders with tax rebates
- Growth that occurs with all money that is contributed to an FHSA is tax-free
- When an account holder decides they are ready to withdraw from their FHSA for a down payment on their home, the money taken out of this account does not incur taxes
Extended RRSP repayment period
Under the forthcoming changes announced by the Canadian government, individuals holding Registered Retirement Savings Plans (RRSPs), including newcomers, will enjoy an extended period to commence repaying their RRSP contributions after withdrawing funds for a home down payment. This adjustment provides these individuals with more than double the previous duration to initiate repayment, thereby offering greater flexibility and easing the financial obligations associated with utilizing RRSP funds for home purchases.
Minister Freeland recently announced that first-time home buyers who make RRSP withdrawals by December 31, 2025, will benefit from an extended repayment period of five years. This represents a significant increase from the previous two-year timeframe, offering Canadians and newcomers greater flexibility in managing their RRSP contributions after withdrawing funds for home purchases.
The extended repayment period is anticipated to provide eligible account holders with enhanced financial flexibility for managing RRSP repayments. This adjustment offers benefits in both the short term and long term, facilitating better budget planning for new homeowners.
Extended amortization period for mortgages
Starting August 1, 2024, certain first-time homebuyers with insured mortgages will benefit from an extended 30-year repayment period, as announced by the Canadian government. However, this longer amortization period applies exclusively to those purchasing newly constructed homes. The extension is advantageous for homeowners as it lowers their monthly mortgage payments, providing greater financial flexibility.
Hence, this initiative, as articulated by Minister Freeland, aims to enable “more younger Canadians [to] afford to pay that monthly mortgage on a new home.” Consequently, it is anticipated to broaden access to homeownership for young Canadians nationwide. This endeavor may also prove advantageous for newcomers, who often arrive in Canada during their younger years.
