The Government of Canada announced that beginning this Spring, changes were coming to the First-Time Home Buyer Incentive Program for qualifying buyers in three of Canada’s most expensive housing markets.
What is the First-Time Home Buyer Incentive Program?
The First-Time Home Buyer Incentive is a program that aims to help make homeownership affordable for qualified first-time homebuyers. This program involves a shared-equity mortgage with the Government of Canada and offers:
- 5% or 10% for a first-time buyer’s purchase of a newly constructed home
- 5% for a first-time buyer’s purchase of an existing home
- 5% for a first-time buyer’s purchase of a new or resale mobile/manufactured home
This incentive aims to make buying a home more affordable for first-time buyers by reducing the amount you need to save for a down payment through an interest-free loan. The larger down payment that you put down results in a smaller mortgage and, ultimately, lower monthly costs.
How does the First-Time Home Buyer Incentive work?
The incentive is based on the property’s market value at the time of repayment. If you received a 5% incentive, you will need to repay 5% of the home’s value at repayment. This could be more or less than the original amount you received, depending on how the market value of your house has changed.
As the homebuyer, you must repay back the Incentive – either after 25 years, or when the property is sold, whichever comes first. The homebuyer can also repay the Incentive in full any time before, without a pre-payment penalty, but you still are required to repay a portion of the equity earned.
What changes are coming to the First-Time Home Buyer Incentive?
The Government of Canada announced that beginning in Spring 2021, three of Canada’s most expensive housing markets will have an easier time qualifying for the First-Time Home Buyer Incentive. These changes only apply to first-time buyers in Toronto, Vancouver, and Victoria.
Here is an overview of the changes:
- First-time buyers will be able to purchase a home up to 4.5 times their household income
- vs. four times their income currently
- They can participate if their household income is $150,000 or less
- vs. $120,000 currently
- With a minimum down payment, the maximum purchase price that will qualify under the program rises to about $722,000 in those three markets
- vs. approx. $505,000 currently nationwide
The First-Time Home Buyer Incentive can be a good option for qualifying homebuyers, but it’s also so important to explore all of your options before committing to a loan like this. Since you are repaying a percentage the equity you have gained in your home, you could end up having to pay back a lot more than you initially anticipated. But don’t worry, at Gail Sylvester Mortgages, we can help you determine if this program is a good fit for you and your family, or we can determine what you can qualify for without the assistance of this program too!