Becoming a “First Time Home Buyer” the Second Time Around

May 16, 2013, Winnipeg, Manitoba – Manitobans dealing with special life circumstances should be able to borrow against their RRSPs to purchase a home – as if they were a first time home buyer, again – and take advantage of the federal Home Buyers’ Plan, say REALTORS® in Manitoba.

Right now, the Home Buyers’ Plan (HBP) is limited to first time home buyers and in some cases, those with a disability, or those who have been out of the housing market for more than five years. The Manitoba Real Estate Association (MREA) and the Canadian Real Estate Association (CREA) would both like to see the program expanded to include people dealing with a major life change, such as:

  • job relocation
  • death of a spouse
  • decision to accommodate an elderly family member
  • marital breakdown

“I’m sure there are many Manitobans in life-changing situations that don’t have the required five percent down payment to purchase a home. It would be nice for these people to have access to the Home Buyers’ Plan to get them back under the umbrella of home ownership,” said Manitoba Real Estate Association president Brian Canart.

The HBP operates like a zero-interest self-loan because it allows Canadians to borrow from their own savings. Generally, you have to repay all withdrawals to your RRSPs within a period of no more than 15 years. “It’s your money locked into your RRSP. All you would be trying to do is borrow down payment money from your retirement savings. You’d have to pay it back,” said Canart.

Canart says in cases of divorce, expanding the HBP would help families and children maintain a more secure home environment and close community ties while going through a rough transition. “Many families go into a suite or other accommodations and try to save money again to get into another home. If they could access their RRSP money a second time, they may be able to purchase a home. Anytime you can get the family back into a home, it’s a much better situation,” Canart says.

Furthermore, borrowing against an RRSP is a much more financially prudent move than cashing in an RRSP, which would result in additional financial hardship at tax time.

Overall, Canart says assisting those dealing with drastic life changes and with those changes that force a sudden move makes good sense for the economy and the apartment vacancy rate. “If you can take people from a rental situation into a home, it certainly frees up that rental property for somebody else.”

MREA/CREA would also like to see the federal government index the Home Buyers’ Plan for inflation. Currently, the HBP is capped at $25,000 for any person in one calendar year. MREA would like to see the program indexed in $2,500 increments to ensure it never loses its purchasing power.

“This initiative is really about getting people into homes,” said Canart.

Home Buyers’ Plan – by the numbers: (source: Canadian Real Estate Association)

  • In 2011, more than 53,000 homes were purchased using the HBP. This resulted in over $2.6 billion in spin-off spending and more than 20,500 jobs.
  • The HBP has allowed over 2.5 million Canadians to save for both retirement and a home without needing to choose one priority over the other.
  • Budget 2009 recognized the need to adjust the HBP for inflation. The limit was raised by $5,000, the first increase since 1992.
  • Tax Free Savings Account (TFSA) limits are indexed to the Consumer Price Index and rounded to the nearest $500. The HBP should be indexed incrementally as well.
  • Using Budget 2009 as a starting point, the plan would adjust by $2,500 in 2015 at a cost of $7.5 million. A further $2,500 increase would occur in 2020.

To learn more about the Home Buyers’ Plan, please visit the Government of Canada website.

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