First Time Home Buyers Incentive
Here’s what you need to know
The Government of Canada will be offering a First Time Home Buyer incentive starting September 2, 2019. Some say this is a political move, others comment that it is a tool to offset the stress test that was implemented in 2016. Either way, here are the details we currently have, with more to come as the date approaches. Check out Bob’s comments on the First Time Home Buyers Incentive, with realtor Zach Terlier.
A Look At The Program Guidelines
The First Time Home Buyer Incentive is designed to reduce mortgage payments without having to put down additional funds. There is specific criteria involved, but if you meet these criteria then you can apply for this mortgage, which is a shared equity mortgage with the Bank of Canada. The mortgage is not interest bearing and repayment happen when the property sells. The government has allotted $1.25 billion over 3 years.
Here’s An Idea Of How The First Time Home Buyer Incentive Works
If you meet one of the following qualifications, you are considered a first time home buyer:
- You have never purchased a home before
- You have gone through a breakdown of marriage or common-law partnership
- In the last 4 years, you did not occupy a home that you or your current spouse or common-law partner owned
Your total qualifying income can not be over $120,000 (whether on your own, with a friend, parents or spouse, income is added together an cannot be higher than $120,000)
- Income includes annual salary (before taxes), investment income and rental income
- Total borrowing is limited to 4 times the qualifying income
The government will offer:
- 5% for a first time buyers purchase of a resale home
- Up to 10% for a first time buyers purchase of a new build
Yes, It Does Have To Be Repaid
The First Time Home Buyer Incentive will have to be repaid. The nice thing is you are not required to make ongoing payments but you will have to repay the Incentive amount after 25 years, or when the property is sold, whichever comes first. You can also repay the Incentive in full at any time, without a pre-payment penalty. One other ‘rule’ to this incentive is before selling the property, the home buyer must obtain approval of the sale from the Program Administrator. We have no other details at this time, but this is definitely an item to understand the fine print on. As we understand it today, repayment is calculated as follows:
- If a home buyer receives a 5%, the home buyer will repay 5% of the home’s value at repayment.
- If a home buyer receives a 10% Incentive, the home buyer will repay 10% of the home’s value at repayment.
Repayment is based on the property’s fair market value at the point in time where repayment is required.
This is a second mortgage when the lawyer is closing your file, they are closing 2 mortgages, which may generate a higher fee. To determine fair market value an appraisal may be required, which will incur appraisal fees. At this time we are not clear if there will be additional fees to switch the mortgage (at maturity) or if you want to refinance the property.