A marital breakdown can involve the possibility of compromising an individual’s ability to re-establish themselves in another home.
But under a proposal by the Manitoba Real Estate Association, with support from WinnipegREALTORS®, Manitobans dealing with special life circumstances would be able to take advantage of the federal Home Buyers’ Plan (HBP) and borrow against their RRSPs for a down payment in order to purchase a home.
“I’m sure there are many Manitobans in life-changing situations that don’t have the required five-per-cent down payment to purchase a home,” said MREA president Brian Canart in a press release. “It would be nice for these people to have access to the Home Buyers’ Plan to get them back under the umbrella of homeownership.”
MREA, WinnipegREALTORS® and the Canadian Real Estate Association (CREA) want to see individuals undergoing life-changing circumstances be treated as if they were again first-time home buyers, with the government expanding the program to give them the ability to take advantage of the Home Buyers’ Plan.
Currently, the 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 proposed changes to expand the program include people dealing with a major life change, such as a job relocation, the death of a spouse, deciding to accommodate an elderly family member, or a marital breakdown.
The HBP operates like a zero-interest self-loan, because it allows Canadians to borrow from their own savings. Under the HBP, withdrawals to purchase a home must make a commitment to repay what they have borrowed from their RRSPs within a period of no more than 15 years.
“It’s your money locked into your RRSP,” said Canart. “All you would be trying to do is borrow down payment money from your retirement savings. You have to pay it back.”
In case of a divorce, said Canart, 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,” he said. “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.”
Furthermore, Canart added, 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 said, 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,” he commented.
MREA, CREA and WinnipegREALTORS® 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. Organized real estate is proposing that the program be indexed in $2,500 increments to ensure it never loses its purchasing power.
“This initiative is really about getting people into homes,” said Canart.
The Home Buyers’ Plan by the numbers (source: the 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.
• The federal government’s 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. Organized real estate also proposes that the HBP should be indexed incrementally.
• 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.