Everything you need to know about Canada’s First-Time Home Buyer Incentive

If you’re a first-time buyer in Canada, you’ve likely been waiting for details on the federal government’s First-Time Home Buyer Incentive program. Well, the details are here, including a start date.

Starting September 2, 2019, first-time buyers in Canada will be able to apply for the FTHBI. The first round of applications will close November 1, 2019. This was the information everyone was waiting for, the rest is basically exactly what you’d expect.    

Here’s a refresher in case you’re unfamiliar with the FTHBI: Qualifying first-time buyers can receive either 5% (resale) or 10% (new construction) of the purchase price from the Canada Mortgage and Housing Corporation to put towards a down payment. This is a shared equity mortgage with CMHC. The government is lending more for new construction homes in order to encourage the creation of more supply. 

There are no ongoing payments and you can repay the loan at any time you want before the deadline without a prepayment penalty. The loan must be paid back after 25 years or when the home is sold. 

The repayment is based on the value of the property at the time of repayment. For example, if you received a 10% ($30,000) loan on a $300,000 home, and 10 years later when you sold, the value was $400,000, then you’d repay 10% of that amount ($40,000). CMHC benefits from increasing value, just like you, and they also share in the risk. For example, if your home value dropped from $300,000 to $250,000, then you’d only owe $25,000. 

“The First-Time Home Buyer Incentive is designed to benefit those who need more assistance with housing costs, middle class Canadians,” says Bill Morneau, Minister of Finance. “Thanks to mortgage payments that are more affordable, many families will have hundreds of dollars more each month in their pockets – money to spend on things like healthy food, sports activities for their kids, or even save for the future.”

According to CMHC calculations, a qualifying first-timer could save $286/month ($3,430/year) on a $500,000 home purchase through the program. At this price, the first-timer would need $25,000 down, then the FTHBI would provide $50,000 (for new construction), which would equal monthly mortgage payments of $2,187. Without the FTHBI, the monthly mortgage payments would be $2,473.    

Who qualifies for the FTHBI?

To qualify for the FTHBI, your household income can not exceed $120,000, and you need a minimum down payment of 5%. The insured mortgage plus the incentive amount can not exceed four times your household income. Also, you need to be a first-time buyer, which is actually more flexible than you’d think. 

To be considered a first-time buyer in the eyes of the government, you need to meet just one of these:
 

• Never bought a home before
• Your marriage or common-law partnership has ended
• You haven’t lived in a home owned by you or your common-law partner (or spouse) in the last four years

When the federal government’s Budget 2019 was announced and the plans for the FTHBI surfaced, it was swiftly criticized for most likely only helping a small percentage of the population, and potentially not being very helpful at all in expensive markets like Toronto and Vancouver. 

According to CMHC, more than 2,000 buyers in Toronto would have qualified in 2018, and more than 1,000 in Vancouver. And right before these numbers were released, Heather Tremain, CEO, Options for Homes - someone who knows a lot about the shared equity model - praised the government’s strategy. 

Now that there’s a start date, we’re eager to see how many first-timers leap at the opportunity to partner with the CMHC on their next home purchase!