The First Time Home Buyer Incentive (FTHBI)
First Time Home Buyer Incentive is a new federal program designed to reduce the monthly mortgage payment without increasing the down payment of their first home. Young Canadians have been concerned about affordable home ownership, especially with rising housing costs. The program is aimed towards middle-class Canadians who need help with purchasing their first home. First-time homeowners will be able to apply for a 5% or 10% shared equity mortgage with the federal government.** This will allow these first-time home buyers to save money on mortgage payments and be able to have more income to work with every month.
First time home buyers can apply for either of the following funding incentives depending on their purchase:
- 5% for a first-time buyer’s purchase of a resale home
- 5% OR 10% for first-time buyer’s purchase of a new build
** A shared equity mortgage is where the government shares in the upside and downside of the property value.
More about this program:
- There are ongoing repayments, the incentive is not interest-bearing
- The incentive can be repaid at any time, but the Incentive must be repaid after 25 years or if the property is sold
- This incentive is available to first-time buyers with an annual income up to 120,000
- To qualify at least one of the borrowers must be a first-time home buyer (definitions about this can be found here).
- You need to be able to meet the minimum down payment to be eligible
How does this program work?
This example is taken from the federal website.
"Anita wants to buy a new home for $400,000. Under the First-Time Home Buyer Incentive, Anita can apply to receive $40,000 in a shared equity mortgage (10% of the cost of a new home) through the program. This is on top of the minimum required down payment of $20,000 (5% of the purchase price) from her savings.
This lowers the amount she needs to borrow and reduces her monthly expenses. As a result, Anita’s mortgage is $228 less a month or $2,736 a year.
Years later, Anita has sold her first home for $420,000. At this time, she would now have to repay the original incentive she received as a percentage of her home’s current value. This would result in Anita repaying 10%, or $42,000 at the time of selling her house."
This program will roll out September 2nd, 2019, and if you are approved for the FTHBI – the closing date must close on or after November 1st, 2019.
You can find more information about eligibility and if you qualify at the Government of Canada’s website here.
Source: REP Magazine and PlaceToCallHome.ca