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A Place to Call Home: First-Time Homebuyer's Incentive


For many Canadians, especially young people and first-time buyers, finding an affordable place to call home is not just a challenge - it feels like an impossibility. There aren’t enough houses for people to buy, or apartments for people to rent. That makes finding a good place to live too expensive and beyond what many people, especially younger Canadians, can afford.

In response to this, the National Housing Strategy, has introduced the First-Time Homebuyers Incentive (FTHBI). Canada Mortgage and Housing Corporation (CMHC) is the Program Administrator that will provide up to $1.25 billion over three years (starting in 2019–20 & ending in 2021-22) to eligible homebuyers by sharing in the cost of a mortgage. This initiative is designed to help young Canadians access home ownership in a fiscally responsible and affordable way. Statistically this is the demographic group with the lowest percentage of homeownership. 


There are a few qualifiers to apply for this incentive:

1. First-Time Homebuyer

At least one borrower must be a first-time homebuyer. To be considered a first-time homebuyer, at least one borrower must meet the following qualifications:

  • Has never purchased a home before; or

  • In the last 4 years, has not occupied a home that either themselves or their current spouse or common-law partner owned; or

  • Has gone through a breakdown of a marriage or common-law partnership (even if the other first-time homebuyer requirements are not met)

2. Maximum Number of Incentives

A borrower/co-borrower/guarantor is only permitted to obtain the incentive once. The maximum of one incentive includes any variation of borrower/co-borrower/guarantor status.

  • Example: once an incentive is disbursed, the borrower/co-borrower/guarantor is not eligible for an additional incentive regardless of any new first-time homebuyer on the application.

3. Equity (Down-Payment)

The borrower must satisfy minimum down-payment requirements, which much come from traditional down-payment sources. Non-traditional down-payment sources are not eligible to satisfy minimum down-payment requirements. Traditional down payment comes from the borrower’s own resources and may include:

  • savings 

  • withdrawal/collapse of a registered retirement savings plan (RRSP) 

  • non-repayable financial gift from a relative 

4. Income

Total qualifying income must not exceed $120,000; stated/declared income is not eligible for the incentive.


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 

Repayment

The first-time homebuyer will be required to repay the Incentive amount after 25 years or when the property is sold, whichever comes first. The homebuyer can also repay the Incentive in full at any time, without a pre-payment penalty. Refinancing of the first mortgage will not trigger repayment.


Before selling the property, the homebuyer must obtain approval of the sale from the Program Administrator.


How is repayment calculated?

  • If a homebuyer receives a 5% Incentive, the homebuyer will repay 5% of the home’s value at repayment.

  • If a homebuyer receives a 10% Incentive, the homebuyer will repay 10% of the home’s value at repayment.

Repayment is based on the property’s fair market value at the point in time where repayment is required.


Additional Costs

The Incentive may be associated with additional costs:

  • Additional legal fees: Your lawyer is closing 2 mortgages so you may be charged higher fees.

  • Appraisal fees: To repay your incentive, you may need to have an appraisal done to value determine the fair market value of your home.

  • Other fees: Additional fees may be incurred throughout the life cycle of the incentive, like switching your first mortgage to a new lender or refinancing your first mortgage.


Article Source: All material is pulled directly from the program’s Policy Manual made available on National Housing Strategies website @ www.placetocallhome.ca