Are you a first time homebuyer looking to lower your monthly payments? The government’s First-Time Home Buyer Incentive (FTHBI) was designed for prospective home owners like you.
The incentive was introduced by the Federal Government in 2019 with the goal of improving affordability for first time home buyers. The program was officially launched on September 2, 2019 and has a three-year budget of $1.25 billion. It was designed to lower monthly mortgage payments for new home buyers without increasing their down payment.
With the help of this program, the federal government will absorb five per cent of monthly mortgage payments on existing homes and 10 per cent on new builds. In addition, under the incentive, CMHC will offer 10 per cent toward the down payment on a new home and five per cent on resale homes, interest-free.
Great deal for qualifying first time home buyers! However, there are several important conditions to watch out for.
Not all home buyers qualify
In order to qualify for this program, the combined annual household income must be lower than $120,000 before taxes and deductions. The price of the mortgage combined with the incentive amount should not exceed more than four times your household income.
Technically, the maximum purchase price of a home under this plan will be approximately $560,000. Unfortunately, this condition excludes many properties in the high demand Toronto market. The program is likely to benefit residents in less crowded markets, like smaller urban centers in Ontario where you can get a home under this price cap.
A study by Zoocasa, a real estate listings database, revealed that most popular areas in Canada to buy a home do not offer many properties at this price. Zoocasa representative shared: “Not surprisingly, the six markets where the average home buyer would not qualify for the FTHBI include homes for sale in Toronto and several markets in its proximity in the Greater Golden Horseshoe such as Hamilton-Burlington and Kitchener-Waterloo, as well as in Greater Vancouver and neighboring Victoria and Fraser Valley.”
You and your household members should really be new homeowners
To be eligible for the incentive, applicants must not have owned a house in the last four years.
There are a few exceptions for common law partnerships or past homeowners that divorced their spouses and don’t own a home anymore.
- It is a loan (albeit interest-free) and it has to be paid back, on government conditions. All borrowers must pay back to the CMHC either after 25 years or when they sell their home, whichever comes first. The loan can also be closed early without a penalty. While the government provides an interest-free loan, they also secure shared equity in your home as it goes through gains and losses. Therefore, the amount paid back to the government will fluctuate based on how much the value of your home drops or rises.
- How much can you save? According to the government-provided quote, the First-Time Home Buyer Incentive will reduce monthly payments on a first mortgage by up to $286. For a family buying a $500,000 home, this program could save them as much as $3430 a year. The program is expected to serve about 100,000 Canadian home buyers.
Jean-Yves Duclos, the Minister of Families and Social Development stated: “Thanks to mortgage payments that are more affordable, many families will have hundreds of dollars more each month in their pockets – money to spend on things like healthy food, sports activities for their kids, or even save for the future”.
If you are a first-time home buyer wanting to explore options to save and get the most competitive deal, do not hesitate to call us. Home and Mortgage Advice are top rated professionals in the industry who have been working with the GTA clients for over ten years.
Call us today to learn about the government incentive for home buyers and other ways to save on your first home.
If you are interested in buying your first home, do not hesitate to contact us by email info@homemortgageadvice.ca or call us at 877-296-2696