The First-Time Home Buyer Incentive launches September 2, 2019. 

The First-Time Home Buyer Incentive helps qualified first-time home buyers reduce their monthly mortgage carrying costs without adding to their financial burdens.

* The program will be ready to receive Incentive applications on September 2, 2019 (barring any unforeseen circumstances). The first closing will take effect on November 1, 2019. 

About the First-Time Home Buyer Incentive

There are a few qualifiers to apply for this incentive:

• you need to have the minimum down payment to be eligible
• your maximum qualifying income is no more than $120,000
• your total borrowing is limited to 4 times the qualifying income 

If you meet these criteria, you can then apply for a 5% or 10% shared equity mortgage with the Government of Canada. A shared equity mortgage is where the government shares 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% for a first-time buyer’s purchase of a re-sale home 
• 5% or 10% for a first-time buyer’s purchase of a new construction 

How do I know how much I have to pay back? 

You can repay the Incentive at any time in full without a pre-payment penalty. You have to repay the Incentive after 25 years or if the property is sold, whichever happens first. 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.  

How do I apply?

Complete and sign the application documents (coming soon) and take them to your lender, who will submit them on your behalf.

NOTE: Once processed and accepted, you MUST call 1.833.974.0963 to activate the FTHBI payment and provide the name of the lawyer/notary you have chosen to close your deal. You must provide your lawyer/notary information as soon as you have chosen one and no less than 2 weeks prior to your closing.

The program is expected to be ready to receive Incentive applications starting September 2, 2019. If approved for the Incentive, the purchase transaction must close on or after November 1, 2019.

How much funding is available? 

The total amount of funding will be $1.25 billion over 3 years.  

Here’s an example.

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) from the Government of Canada. 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.

Article Sources: CMHC