The New First-time Home Buyer Incentive – What it is and what it means for you
At the beginning of September 2019, the Government of Canada introduced the First-time Home Buyer Incentive (FTHBI). The new program is designed to make buying a home more achievable for young people and first-time home buyers by reducing monthly mortgage payments without increasing their down payment. Applications are officially being accepted as of September 2, 2019. Jean-Yves Duclos – Minister of Families and Social Development who also oversees the Canada Mortgage and Housing Corporation – stated last week that the program is working to empower the middle class. We will break down the FTHBI to help you get a better understanding of all of the moving parts in this valuable program.
What is the FTHBI?
The First-time Home Buyer Incentive is considered a Shared Equity Mortgage, (SEM) which means that the Canadian Government will have a shared interest in the borrower's property value. An interest-free loan given by the Canadian Government will act as the incentive, and the program will run through Canada Mortgage Housing Corporation (CMHC), Genworth and Canada Guaranty – the default insurers. For qualified borrowers, the government will absorb 5% of mortgage payments on resale properties and up to 10% on new construction homes.
The loan will have to paid back when you sell your home or after 25 years. Because the government will have shared equity in your home, the amount that gets paid back will fluctuate along with the value of your home, decreasing and increasing as your home goes through gains and losses. Repayment amount will be based on fair market value to be determined at the time of repayment, and the loan will have no monthly payment or interest.
Who qualifies for the FTHBI?
There are a number of criteria for the First-time Home Buyer Incentive, 1. The first requirement is that at least one of the borrowers must be a first-time home buyer. A first-time buyer is considered to be someone who has not owned a house in the last four years – with some exceptions being made for those in a "breakdown of marriage or common-law partnership." 2. The borrower must be a Canadian Citizen, Permanent Resident or Non-Permanent Resident who is legally authorized to work in Canada, and the property being purchased must be located in Canada and owner-occupied. 3. The borrower's annual qualifying household income cannot exceed $120,000. 4. Only high-ratio mortgages (greater than 80% loan-to-value) are eligible and borrowers must contribute the minimum required down payment from traditional sources, which is currently set at 5%.
There is a self-assessment tool available on the FTHBI website which allows users to determine their eligibility for the program.
How to apply
If you’re looking to apply, you can speak with your mortgage broker or visit the FTHBI website. Here, you can find all of the details on the programs as well as the application process. Applicants must provide a signed original or signed copy of the 'FTHBI Program Attestation, Consent and Privacy Notice' at the time of application, a form which can be found on the FTHBI website, along with the signed privacy agreement and credit application. Only applications submitted after September 2, 2019 will be accepted, however the closing date must be on or after November 1, 2019 for applications to be considered.
The First-time Home Buyer Incentive is a great tool that will allow young people and first-time home buyers to have an even playing field when trying to purchase their first home. For all of your home buying and selling needs, or if you have any questions about the FTHBI, please don’t hesitate to call us here at Spectrum Realty Services. Our knowledgeable, qualified and helpful team are happy to assist you and answer any questions you may have about finding your dream home. Call us at 416-736-6500.