First-Time Home Buyer Incentive Program
The federal governments plan to boost home ownership among middle-class families will start on September 2, 2019. The First Time Buyer Incentive will allow eligible first-time homebuyers who have the minimum down payment for an insured mortgage with Canada Mortgage and Housing Corporation (CMHC), Genworth or Canada Guaranty, to apply to finance a portion of their home purchase through a form of shared equity mortgage with the Government of Canada. Meanwhile, the Shared Equity Mortgage Provider Fund will launch this July 31. Administered by CMHC, the five-year, $100-million lending fund to assist providers of shared equity mortgages to help eligible Canadians achieve affordable homeownership.
The First-Time Home Buyer Incentive helps qualified first-time homebuyers 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.
Quick Facts about the First Time Homebuyer Incentive:
- The program will launch on September 2, 2019, with the first closing on November 1, 2019.
- The incentive will allow eligible first-time homebuyers who have the minimum down payment for an insured mortgage with CMHC, Genworth or Canada Guaranty, to apply to finance a portion of their home purchase through a form of shared equity mortgage with the Government of Canada.
- For the purchase of an existing home, an incentive amount of 5 percent may be available. For the purchase of a newly constructed home, an incentive amount of 5 percent or 10 percent may be available.
- Doubling the incentive for purchasers of new homes encourages new housing supply.
- No on-going repayments are required, the incentive is not interest-bearing, and the borrower can repay the incentive at any time without a pre-payment penalty.
- The government shares in the upside and downside of the change in the property value.
- The buyer must repay the incentive after 25 years, or if the property is sold.
- The incentive will be available to first-time homebuyers with qualified annual household incomes up to $120,000. At the same time, a participant’s insured mortgage and the incentive amount cannot be greater than four times the participant’s qualified annual household income.
- Per the table below, for a family buying a $500,000 home, this program could save them as much as $286 per month or more than $3,430 a year (note: for illustration purposes only, results subject to change depending upon amortization, interest rate, term, etc.).