Home Buying And Homeowning In 2025 Is Getting Easier!
Over the past few years, it has become increasingly challenging for Canadians to buy new homes, and maintain payments on homes they have already purchased. The cost of living, higher interest rates, and the tight housing supply in certain Canadian cities have all contributed to the challenge. Further, according to a report1 from the Canada Mortgage and Housing Corporation (CMHC), more than 1.2 million mortgages are coming due in 2025, meaning many Canadians will be renewing mortgages, potentially at higher rates than when they first qualified for them.
The government recognizes the concern Canadians are facing and is committed to adding and amending programs designed to help access and afford home ownership.
Here is a summary of new and adjusted programs that may help Canadians achieve their home ownership goals:
The First Home Savings Account (FHSA)
The FHSA was introduced in 2023 to help first-time homebuyers2 save for a downpayment on a home. Eligible participants can contribute up to $40,000 to a registered tax-free account which can be used toward a qualifying first home purchase. Qualifying Canadians between 18 and 71 can contribute $8,000 per year (up to $16,000 in a year if they previously opened an account and have carry forward room) to their FHSA. Contributions are tax-deductible, and gains earned in the account are tax-free, as are withdrawals used to purchase a qualifying home.
Extra perks
Qualifying couples3 purchasing a home together may each use an FHSA.
FHSA withdrawals may be made alongside withdrawals from an RRSP under the Home Buyers’ Plan4 (HBP) for the same qualifying home.
Don’t forget: FHSA holders have 15 years from the time the account is opened (or when they turn 71, whichever comes first) to use the funds for a qualifying home. After 15 years or at age 71, the account must be closed.
An Increase To The Home Buyers’ Plan (HBP) Withdrawal Limit
In 2024, the federal government increased the withdrawal amount from $35,000 to $60,000 per qualifying first-time homebuyer5. Recall that the HBP allows Canadians to withdraw funds tax-free from their Registered Retirement Savings Plan (RRSP) and they must repay the amount over 15 years.6
Extra perks
Qualifying couples purchasing a home together may each borrow from the RRSPs under this program, for a maximum withdrawal of $120,000.
HBP withdrawals may be made alongside withdrawals from an FHSA for the same qualifying home.
Don’t forget: Funds withdrawn from RRSPs stop earning tax-deferred returns toward retirement. Borrowed amounts must be repaid to an RRSP, beginning the second year after you make your first withdrawal from the HBP. Failure to make and correctly allocate repayments will result in income tax being charged to the borrower on amounts not repaid in the year the repayment is missed.
Extension on HBP Repayment
Canadians who leverage the HBP program must typically repay the borrowed amount over 15 years, beginning the second year after the year of the first withdrawal. However, to respond to housing affordability, the government has extended the start of the repayment period to begin five years following the year after the first withdrawal. This extension is available to participants who made their first withdrawal between 1 January 2022 and remains available for those who make their first withdrawal before 31 December 2025.
Extra Perks
Participants can make repayments anytime, they don’t have to wait for a certain year to begin repaying borrowed amounts, and they can repay more than 1/15th of the amount borrowed in any year.
Don’t forget: Longer repayment periods result in less time in the tax-deferred RRSP, which may impact retirement savings goals.
Extended Amortizations
Effective 15 December 2024, lenders can offer 30-year amortization periods to all first-time homebuyers, and all buyers of newly built homes. Spreading the repayment amount over a longer amortization period will make monthly mortgage payments lower, which could result in more buyers qualifying for loans they may not have with a shorter amortization period. It also helps to address cashflow concerns.
Don’t forget: A longer amortization period results in the buyer paying a mortgage for longer and paying more interest over the length of the mortgage, which increases the overall cost of buying the home.
Expanded Mortgaged Default Insurance
Mortgage default insurance is now available on homes valued up to $1.5 million. This is an increase from the previous cap of $1 million. This change, effective 15 December 2024, recognizes the rising prices of homes and supports those who would need this insurance to purchase them. Mortgage default insurance is required for borrowers who make a downpayment of less than 20%7.
Don't forget: The cost of insurance will also increase as it is based on the amount borrowed.
Amendments To Stress Testing At Mortgage Renewal
Prior to last year, borrowers considering switching lenders at renewal would have to re-qualify for their mortgage, at a possibly higher interest rate. This made it difficult for many Canadians to change lenders, and reduced lending competition. The ability for Canadians to shop around for new lenders at renewal will increase competition, which could lead to lower rates and better terms for mortgage borrowers.
Don’t forget: Different lenders offer different terms such as prepayment allowances and timing, switching costs, and portability. Canadians should consider the suitability of a new lender and any fees involved in changing mortgage providers, in addition to the rates they offer at the time of switching.
In addition to all of these programs and amendments, there may also be tax credits available for homebuyers to claim when filing their first tax return following a home purchase. These include the GST/HST rebates, the homebuyers’ amount, the multi-generational home renovation credit and the home accessibility credit. More information can be found on the Government of Canada website. To understand how these programs can best be leveraged to support your unique homebuying and financial goals, consider speaking with a financial advisor or tax professional.
Julie Petrera, MBA, CFP, CIM is a certified financial planner. X: @petrerajulie
1 Full report here: https://assets.cmhc-schl.gc.ca/sites/cmhc/professional/housing-markets-data-and-research/housing-research/research-reports/housing-finance/residential-mortgage-industry-report/2024/residential-mortgage-industry-report-fall-2024-en.pdf?_gl=1*64mx65*_gcl_au*MTAxMjcwOTkzNy4xNzMyNzEwODQ1*_ga*MTk2NjU1NjAwNS4xNzMyNzEwODQ1*_ga_CY7T7RT5C4*MTczMzE1MzY1Mi4yLjEuMTczMzE1MzcyOS41Ny4wLjA.
2 CRA defines this here: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/first-home-savings-account/opening-your-fhsas.html#h-1
3 Qualifications are defined here. https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/first-home-savings-account/opening-your-fhsas.html
4 HBP Details can be found here: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/what-home-buyers-plan.html
5 Qualifying first time home buyers under the HBP are defined here: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/what-home-buyers-plan/definitions-home-buyer-s-plan.html#fthb
6 See below for extension on when the 15 years begins.
7 Additional requirements for mortgage default insurance are available here: https://www.cmhc-schl.gc.ca/consumers/home-buying/mortgage-loan-insurance-for-consumers/what-are-the-general-requirements-to-qualify-for-homeowner-mortgage-loan-insurance