The Government of Canada introduced a Homeownership Incentive Program to First-Time Home Buyer(s) Incentive (“Incentive”). The Incentive aims to help qualified first-time homebuyer(s) reduce their monthly mortgage costs.
Eligible first-time homebuyer(s) who have the minimum down payment for an insured mortgage can apply to finance a portion of their home purchase through a shared equity mortgage with the Government of Canada.
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
- you must have the intent to occupy the property (investment properties are not eligible)
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.
The Incentive is a second mortgage on the title of the purchased property and there are no regular principal payments that must be made.
The Incentive can be paid back at any time in full and without a pre-payment penalty and the Incentive must be repaid after 25 years or if the property is sold, whichever occurs first.
There may be additional costs associated with the Incentive, for example:
Additional legal fees: There will be 2 mortgages on your home closing, so you will likely be charged additional legal fees and disbursements.
Appraisal fees: To repay your Incentive, you may be required to have an appraisal completed to determine the fair market value of the home.
Other fees: Additional fees may be incurred throughout the Incentive period. For example, if you change your existing first mortgage to a new first mortgage lender or refinancing your first mortgage. Your lawyer will likely have to obtain a postponement of the Incentive mortgage to the new first mortgage which means additional legal fees and disbursements.
How do you apply?
You must complete and sign the application documents available on the government website 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 you have chosen to close your deal. You must provide your lawyer information as soon as you have chosen one and no less than 2 weeks prior to your closing.
If approved for the Incentive, the purchase transaction must close on or after November 1, 2019.
There are useful resources available to see if you qualify for the Incentive and how it may assist with lowering your mortgages payments.
To see if you are eligible for the Incentive you may access the eligibility calculator at: