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New First-Time Home Buyer Incentive

The 2019 federal budget included an incentive for prospective first-time home buyers that would see the government contribute up to 10% of the purchase price of a home.

Under the new First-Time Home Buyer Incentive, the Canada Mortgage and Housing Corporation (CMHC) would use up to $1.25 billion over three years to help lower mortgage costs for eligible Canadians.

It’s more like an almost interest-free loan where the repayment plan doesn’t require any payback until years in the future. The money would go to first-time home buyers applying for insured mortgages. Borrowers would still have to come up with a down payment.

The response from stakeholders and economists have been mixed – some hopeful, while some in high-priced markets are questioning whether it will help their prospective buyers.

As of September 2, 2019, the First-Time Home Buyer Incentive became available for qualified first-time homebuyers. For many Canadians, especially young people and first-time buyers, finding an affordable place to call home is not just a challenge – it feels like an impossibility. This initiative is designed to make owning a home more affordable.

You are considered a first-time homebuyer if you meet one of the following qualifications:

  • You have never purchased a home before

  • You’ve recently experienced a breakdown of a marriage or common-law partnership

  • In the last four years, you did not occupy a home that you or your current spouse or common-law partner owned

Qualifications guidelines:

  • Need minimum down payment to qualify

  • You can apply for a 5% or a 10% shared equity mortgage

  • Maximum qualifying income no higher than $120,000

  • Total borrowing is limited to a 4x the qualifying income

How does it work?

  • Each client has different needs and different financial goals. I can help make your mortgage financing happen.

  • Need minimum down payment to qualify

  • 5% or 10% for first-time homebuyers for purchase of new construction

How does it get paid 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.

How does the “shared equity” work?

Repayment based on property’s fair market value

EXAMPLE: 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 you pay back 5% of the current value or $15,000. Or, 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.

The property must be located in Canada and must be suitable and available for full-time, year-round occupancy.

Eligible properties include:

New construction

Re-sale home

New and re-sale mobile/manufactured homes

*Residential properties can include 1 to 4 units

Types of residential properties include:

  • Single family homes

  • Semi-detached homes

  • Duplex

  • Triplex

  • Fourplex

  • Town houses

  • Condominium units

Other costs:

The incentive may be associated with additional costs:

Additional legal fees: Your lawyer is closing two mortgages so you may be charged higher fees.

Appraisal fees: To repay your incentive, you may need to have an appraisal done to value determine the fair market value of your home.

Other fees: Additional fees may be incurred throughout the life cycle of the incentive, like switching your first mortgage to a new lender or refinancing your first mortgage.

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