First-time homebuyer incentive will be discontinued as of March 21, 2024.
What if we told you that you could afford to buy your first home? Have we caught your attention? Hear us out — or hear out the First-Time Home Buyers Incentive program!
What is the program?
We’ll explain it as straightforward as we can — the First-Time Home Buyers Incentive is a shared-equity mortgage with the Government of Canada. In other words, the government is loaning you money to help increase your down payment, reducing the cost of your mortgage payments. It's kind of like a second mortgage, but with no interest.
Pretty cool, right?
What are the criteria?
Of course, some rules are in place to qualify. To be eligible for the incentive:
- You must be a Canadian citizen, permanent resident or non-permanent resident authorized to work in Canada
- You or someone you’re buying the home with must be a first-time home buyer
- You have at least a 5% down payment with traditional funds
- Your total annual income is no greater than $120,000 (or $150,000 if the home you are purchasing is in Toronto, Vancouver, or Victoria)
- The total borrowing, including the incentive and down payment, is no more than 4 times your annual income (or 4.5 times if the home you are purchasing is in Toronto, Vancouver or Victoria)
How much does the government provide?
It depends on what you buy! Here’s how it works:
- 5% or 10% for newly constructed homes (Hi, that would be us!)
- 5% for resale homes
- 5% for a mobile/manufactured home (new or resale)
We’ll give you an example. Let’s say you’re buying a newly constructed home for $400,000. You have the minimum down payment requirement. With the First-Time Home Buyers Incentive, you get an extra 10% added to your down payment! Here’s what the numbers look like.
Without Incentive
Price: $400,000
5% Down Payment: $20,000
Monthly Mortgage Payments (at 4.75% interest): $2,243
With Incentive
Price: $400,000
5 Down Payment + 10% from government: $60,000
Monthly Mortgage Payments (at 4.75% interest): $1,983
That’s $260 a month you’re saving on your monthly payments, for a total of $3,120 for the year!
What else do I need to know?
You need to repay the incentive without penalty after 25 years or when you sell the property — whichever comes first. So, you have time to pay it back!
How much you pay back depends on the market value! Because the government shares the equity of your home, they share the gain or loss of your property up to a maximum of 8% per year. If your home’s value has increased by a maximum of 8%, you must pay back the incentive plus the gain increase. If your home’s value has lowered up to a maximum of 8%, you pay the incentive minus the loss back!
Is that it?
That’s it! The First-Time Home Buyers Incentive is a great way to get your foot in the real estate door, bearing in mind that you will eventually need to return the amount borrowed. But with lower payments, you can start using some of those savings towards paying the government back — and you have a gorgeous home in your name.