As the cost of living in Canadian cities soars, the federal government has introduced recent measures in the 2019 Federal Budget to help middle class families afford to own their first homes. The newest Canada Mortgage and Housing Corporation (CMHC) initiative has gone into effect as of September 2nd — the First-Time Home Buyer Incentive (FTHBI). If you’re looking to buy your first home, incentives like the FTHBI can help make your purchase more financially feasible, so it’s important to be aware of what they entail and how to qualify.
What exactly is the First-Time Home Buyer Incentive? Announced by the CMHC in June 2019, the purpose of the FTHBI is to support first-time home owners by reducing monthly mortgage payments without increasing the amount needed for a down payment. This incentive is effectively an interest-free loan that does not require ongoing payments. This means the federal government shares the risk in any changes in property value of your home. If you receive a 5% incentive of your home’s purchase price, you’ll be repaying that 5% of your home’s value at the time of repayment, regardless of whether your property gained or lost value.
Who will be eligible for the FTHBI? First-time home buyers with annual household income up to $120,000, buying a home worth no more than 4x the qualifying income. Qualified buyers will still need to have the minimum down payment for an insured mortgage with CMHC, Genworth, or Canada Guaranty. The purchase transaction must close on or after November 1st, 2019, to qualify.
How does the FTHBI work? Qualified home buyers can apply to finance a portion of their purchase, whether it’s a new build (incentive amount: 5-10%) or an existing home (incentive amount: 5%). This financing comes in the form of a shared equity mortgage with the Government of Canada, to be repaid after 25 years or when the home is sold. By taking advantage of this incentive, the Government of Canada estimates first-time home buyers will save $2401/year on monthly mortgage payments on a $350,000 home.
To learn more about the CMHC’s First-Time Home Buyer Incentive, visit their website for more information, and talk to a mortgage broker to see if you meet the eligibility requirements.