First-Time Home Buyer Incentive
Following the announcement of the First-Time Home Buyer Incentive in Budget 2019, the Government of Canada has just released additional details about the incentive, including eligibility requirements and how the program will be implemented.
The First-Time Home Buyer Incentive launches September 2, 2019*.
*Barring any unforeseen circumstances the program will launch on September 2, 2019. The first closing will take effect on November 1, 2019.
First-Time Home Buyer Incentive
- The First-Time Home Buyer Incentive (the Incentive) helps qualified first- time homebuyers reduce their monthly mortgage carrying costs without adding to their financial burdens.
- You need to have the minimum down payment to be eligible. You can then apply for a 5% or 10% shared equity mortgage with the Government of Canada. Your maximum qualifying income is no more than $120,000 and your total borrowing is limited to 4 times the qualifying income.
- The Incentive has an equity-like payout, where the government would share in the upside and downside of the property value.
How does it work?
The Incentive enables first-time homebuyers to reduce their monthly mortgage payment without increasing their down payment. The Incentive is not interest bearing and does not require ongoing repayments.
Through the First-Time Home Buyer Incentive, the Government of Canada will offer:
- 5% of a first-time buyer’s down payment for the purchase of a re-sale home.
- 5% or 10% of a first-time buyer’s down payment for the purchase of a new construction.
How do I know how much I have to pay back?
You can repay the Incentive at any time without a pre-payment penalty. You have to repay the Incentive after 25 years or if the property is sold. The repayment of the Incentive is based on the property’s fair market value:
- You receive a 5% incentive of the home’s purchase price of $200,000, or $10,000. If your home value increases to $300,000 your payback would be 5% of the current value or $15,000.
- You receive a 10% incentive of the home’s purchase price of $200,000, or $20,000 and your home value decreases to $150,000, your repayment value will be 10% of the current value or $15,000.
NOTE: If your property value goes down, you are still responsible for repaying the shared equity mortgage based on the current home value at time of repayment.
Incentive by Property Type:
| Property Type | Incentive (%) |
| New Construction | 5% or 10% |
| Existing Home | 5% |
| New or re-sale mobile/manufactured home | 5% |
Funding Available
The First-Time Home Buyer Incentive works on a first-come-first-serve basis. The total amount of funding will be $1.25 billion over 3 years.
Who can apply?
- Canadian citizens, permanent residents, and non-permanent residents who are legally authorized to work in Canada.
- Borrowers (and/ or total income if more than one applicant) must have a maximum qualifying income of $120,000.
- This is subject to qualifying income requirements set out by lenders and mortgage loan insurers
- At least one borrower must be a first-time homebuyer (if you meet one of following qualifications: you have never purchased a home before, you have gone through a breakdown of a marriage or common-law partnership (even if you don’t meet the other first- time home buyer requirements); in the last 4 years, you did not occupy a home that you or you current spouse or common-law partner owned.
Are there other mortgage details?
- Total borrowing is limited to 4 times the qualifying income. The combined mortgage and Incentive amount cannot exceed four times the total qualifying income.
- The amount for the mortgage loan insurance premium is excluded from this calculation.
- The Incentive will be a second mortgage on the title of the property. There will be no regular principal payments, it’s not interest bearing and has a maximum term of 25 years.
- The Incentive will have an equity- like payout, where the Government of Canada will share in the upside and downside of the property value upon repayment.
Candace Perko
Mortgage Broker
Countryside Financial
www.countrysidefinancial.ca
