Canada’s First-Time Home Buyer Incentive
Ready to purchase your first home but feel worried about whether you’ll be able to afford the monthly mortgage payments? If so, you’ll be happy to hear there’s a new program designed to help ease those concerns. This September, the Federal Government will be rolling out the First-Time Home Buyer Incentive program, which aims to reduce monthly mortgage payments without increasing the down payment. Finally, more buyers can purchase their dream home while keeping more of their hard-earned money in the bank. Here’s everything you need to know about what this new program entails and how to determine if you qualify.
What Is The New First-Time Home Buyer Incentive?
Administered by the Canadian Mortgage and Housing Corp (CMHC), this program will offer a shared equity mortgage with the government for those who qualify. This simply means that the government will provide you with either 5% of the purchase price for an existing home or 10% of the purchase price for a new home to help reduce the overall monthly mortgage payments. The loan will be non-interest bearing and will not require any ongoing payments, unlike the RRSP-based Home Buyer’s Plan (HBP). Instead, the loan is in exchange for the home, which means you’ll need to pay back either 5% or 10% of the sale price when you sell the home or at the 25-year mark if you don’t plan to sell.
How Does It Work?
In essence, you’ll be sharing the upswings and downswings of the property value with the government. For instance, let’s say you have enough down payment saved to purchase a $400,000 newly built home but worry that you don’t make enough to comfortably cover the monthly mortgage payments. By using the new First-Time Home Buyer Incentive program, you would pay the $20,000 down payment (required 5% minimum) and receive $40,000 from CMHC (10% of the cost of a new home). The incentive would drop your total mortgage amount from $380,000 to $340,000 and your new monthly mortgage payments would decrease by approximately $200 a month. That’s over $2,000 a year in reduced payments and savings! Plus, you’ll only be required to pay back any money when you plan to sell in the future or after 25 years.
So let’s say in 10 years, you decide to sell the home and the property value has increased to $500,000. You’ll be required to repay 10% of the fair market value to CMHC at the time of the sale, equating to $50,000 in this case.
What Are The Benefits?
There are many first-time buyers who can afford to save for a 5% down payment to purchase a home. But what they’re often unsure about is whether it’s feasible to juggle the monthly mortgage fees alongside their everyday expenses. This concern is what deters many from purchasing a home in today’s market, even when they’re ready to do so. The new incentive is geared to help solve this problem without placing any further financial burden onto buyers’ plates.
Here’s a breakdown of the major benefits of the First-Time Home Buyer Incentive program:
- Helps reduce the amount you need to borrow as well as the monthly mortgage carrying costs
- Interest-Free – you will not be required to pay interest on the loan like you would with a line of credit or other standard loans
- Does not require ongoing repayments during the term – you’re only required to pay back the loan at the 25-year mark or once you sell the property
- You can pay the incentive at any time without a pre-payment penalty
- You only pay 5% or 10% of the fair market value at the time of sale, even if the property
Allows you to afford a home up to $480,000 (mortgage value plus CMHC loan) – helping
you afford much more than just a condo in Edmonton
When Does It Start?
This new incentive will be offered to all first-time home buyers who qualify starting on September 2nd, and the first closings will commence on November 1st, 2019.
Do I Qualify?
Let’s take a closer look at who qualifies for the new program:
- At least one borrower must be a first-time home buyer
- Must have a minimum down payment of 5% of the purchase price that comes from the
borrower’s own savings, RRSP, or non-repayable financial gift from a relative
- Mortgages must be eligible for mortgage loan insurance and the loan must be greater
than 80% of the property value
- Qualifiers must pass the Federal “stress test”
- Total qualifying income does not exceed $120,000 per year
- Total borrowing amount (mortgage plus incentive amount) is less than 4 times the
Who Is Considered A First-Time Home Buyer?
A “first-time home buyer” doesn’t strictly refer to those who have never owned a home before. You can also qualify if there’s been a recent change to your marriage or common- law status or if you have not lived in a home that you own for the past 4 years.
How Can I Get Started?
To determine whether you qualify under the rules set forth by CMHC, get in touch with us at Dolce Vita Homes today! One of our advisors will be glad to assist you. We’ll go over the criteria to determine if you’re eligible and can help you find a brand new home to purchase that suits your needs, budget and lifestyle. We’ll even submit the incentive applications for you by September 1st to ensure that you can take possession as soon as the closing date arrives on November 1st. And even if you don’t qualify, our team will find a solution to help you get into a new home as soon as possible.
So, what are you waiting for? Reach out to us today so you get into that new home that you’ve been dreaming of!