This past Monday (September 2, 2019) the federal government’s First-Time Home Buyer Incentive went into effect.
This new program is aimed at making home ownership more affordable for young Canadians by lowering the price of new home buyers monthly mortgage payments.
Am I Eligible?
You can apply for the incentive if you:
- Canadian citizens, permanent residents, and non-permanent residents who are legally authorized to work in Canada
Don’t make more than $120,000 per year
- Total qualifying income must be $120,000 per year or less
- This is subject to qualifying income requirements set out by lenders and mortgage loan insurers
Are buying your first home
- You have never purchased a home before
- You are experiencing the breakdown of a marriage or common-law partnership (even if you don’t meet the other first-time home buyer requirements)
- In the last 4 years, you did not occupy a home that you or your current spouse or common-law partner owned
What kind of home can I buy?
Eligible residential properties include:
- New construction
- Re-sale home
- New and re-sale mobile/manufactured homes
- Residential properties can include 1 to 4 units
Types of residential properties include:
- Single family homes
- Semi-detached homes
- Condominium units
The property has to be located in Canada and must be suitable to live in all year.
You can’t rent out the property. To qualify for the incentive your intent has to be to live there.
How much will this reduce my payments?
If you buy a re-sale home, 5%
If you buy a new home, 5% or 10%
How expensive a home can I buy?
The First-Time Home Buyer Incentive is only available for homes up to about $530,000.
- The First-Time Home Buyer Incentive is only available for individuals with a qualifying income of $120,000
- Your total borrowing limit is capped at 4 times your qualifying income
Based on that equation, the government will only provide the incentive on homes up to $120,000 x 4 = $480,000.
If you happen to have a $50,000 down payment available, you could bump that number up to $530,000.
How long do I have to pay it back?
While this incentive will lower your monthly payments, you will have to pay it back within 25 years or if the property is sold.
Keep in mind, though, that the incentive is in the form of a shared equity mortgage with the Government of Canada. So, while your payments may decrease by 10%, that’s only because the government owns a 10% share of your home.
If the value of your home increases over those 25 years you have to pay the incentive back, so to does the cash value of the government’s 10% stake in your house.
Two examples are provided at placetocallhome.ca:
- You receive a 5% incentive of the home’s purchase price of $200,000, or $10,000. If your home value increases to $300,000 your payback would be 5% of the current value or $15,000
- You receive a 10% incentive of the home’s purchase price of $200,000, or $20,000 and your home value decreases to $150,000, your repayment value will be 10% of the current value or $15,000
Anything else I should know?
The Government of Canada’s site, https://www.placetocallhome.ca/fthbi/first-time-homebuyer-incentive has all the details of the incentive, including calculators and self-assessment tools to help you determine your maximum purchase price and what you could receive as an incentive.
While this incentive is priced too low to help new home buyers in crowded markets like Toronto and Vancouver, where the average home price is nearly $1,000,000, it is ideal for markets like Edmonton.