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First-Time Home Buyer Incentive
The First-Time Home Buyer Incentive (the Incentive) helps qualified first-time home buyers 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.
* Barring any unforeseen circumstances the program will launch on September 2, 2019. The first closing will take effect on November 1, 2019.
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:
You can repay the Incentive at any time without a pre-payment penalt=”sunlite mortgage”y. 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:
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% |
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.
The Incentive is to help first-time home buyers purchase their first home. Eligible properties include:
Anita wants to buy a new home for $400,000.
Under the First-Time Home Buyer Incentive, Anita can apply to receive $40,000 in a shared equity mortgage (10% of the cost of a new home) through the program. This is on top of the minimum required down payment of $20,000 (5% of the purchase price) from her savings.
This lowers the amount she needs to borrow and reduces her monthly expenses.
As a result, Anita’s mortgage is $228 less a month or $2,736 a year.
Years later, Anita has sold her first home for $420,000. At this time, she would now have to repay the original incentive she received as a percentage of her home’s current value. This would result in Anita repaying 10%, or $42,000 at the time of selling her house.
* This example is for illustrative purposes only. All property values and home prices used in this example are not an indicator on how property values are forecasted.
John Ying has an annual income of $83,125.
To be eligible for Canada’s First-Time Home Buyer Incentive, he can purchase a home up to $350,000. John still has the required minimum down payment of 5% of the purchase price, $17,500 from his savings. He can receive $35,000 in a shared equity mortgage — 10% of a newly constructed home.
This would reduce John’s mortgage payments by $200 a month or $2,401 a year.
Years later, John has to decided to sell his home, but it is now worth $320,000. When he sells his house at the price of $320,000, John will have to repay the original incentive he received as a percentage of his home’s current value. This would result in John repaying 10%, or $32,000 at the time of selling his house.
* This example is for illustrative purposes only. All property values and home prices used in this example are not an indicator on how property values are forecasted.