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First Time Home Buyer

The Federal Government recently announced the First-Time Home Buyer Incentive. There will be $1.25 billion available over 3 years. This program allows for a 5 or 10% shared equity mortgage with the Government of Canada. As long as you have the minimum down payment for the home you are purchasing, the government could potentially provide financial assistance towards the purchase of your home.

There are certain criteria that must be met in order to qualify.
  • Must be a Canadian citizen, permanent resident and non-permanent resident who are legally authorized to work in Canada
  • Your maximum household income must not be more than $120,000 per year (subject to requirements set out by lenders and mortgage loan insurers)
  • At least one borrower must be a first time home buyer
    • Never purchased a home before
    • Gone through a breakdown of a marriage or common-law partnership
    • In the last 4 years, did not occupy a home that you or your common-law partner owned (it is possible that you or your common-law partner qualifies for the incentive, even if you or your spouse/common-law partner has previously owned a home
    • The 4-year period begins on January 1st of the fourth year before the year you purchased your home. It ends 31 days before the date you purchase your new home
  • Your total borrowing limit is 4 times your qualifying income
  • The purchase of the home must occur on or after November 1, 2019
  • Purchased transactions that close prior to September 2, 2019 are not eligible for the incentive

This program would enable qualifying participants to reduce their mortgage payments when purchasing a re-sale home or a new construction home. When purchasing a re-sale home, only 5% is eligible to be put towards the purchase of the home. For a new construction home, 5% or 10% is eligible to be put towards the purchase of the home.

The incentive must be paid back after 25 years or if the property is sold. Keep in mind, that this incentive is based on the selling price of the home. If the price increases over time, when you sell the home, you are paying back 5% based on the actual sold price, not the purchase price of the home. The flip side to this is that if the home sells for less than the purchase price, then you are paying less of the incentive back. This is why it is called a shared equity mortgage.

Other details to keep in mind:

  • The amount for the mortgage loan insurance premium (when you have less than 20% of the purchase price for the down payment) is excluded from this calculation.
  • The incentive will be a second mortgage on the title of the property. There are no regular principal payments on the incentive and there is no interest bearing. The maximum term is 25 years.
  • The Government of Canada shares the upside and downside of the property value when the incentive is payed back.
  • The incentive can be paid in full at any time without a pre-payment penalty. Refinancing the first mortgage will not trigger repayment.

More information can be found on the Government of Canada website: First-Time Home Buyer Incentive

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