The First-Time Home Buyer Incentive launches on September 2, 2019 and was designed to help qualified first-time home buyers reduce their monthly mortgage carrying costs without adding to their financial burdens.
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.
At least one homeowner must be a first-time homebuyer, which is considered as the following:
- Have never purchased a home before
- Have gone through a breakdown of marriage or common-law partnership (even if the other first-time home buyer requirements are not met)
- In the last 4 years did not occupy a home that was occupied by the homebuyer or their spouse
IMPORTANT: It’s possible that you or your spouse or common-law partner qualifies for the First-Time Home Buyer Incentive (if you are in a married or common-law relationship) with the 4-year clause even if you’ve owned a home.
How does it work?
The Incentive enables first-time home buyers 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.
More details about the First-Time Home Buyer Incentive will be released later this month. The program will be ready to receive Incentive applications on September 2, 2019; with the first closing taking effect on November 1, 2019. If you have any questions, or would like to know if this program is right for you, please contact me today.