The government of Canada has officially kicked off the new ‘Home Buyer Incentive Program’. Here are the top things you should know about this new program and how you can qualify.
The government will receive equity in your home.
The FTHBI is a shared-equity mortgage program, which means the government will share in the gains and losses of your home’s value as it fluctuates over time. Through the incentive, Canada Mortgage Housing Corp. (CMHC) will offer 10 percent toward the down payment for a new home, and five percent for resale homes, interest-free. It is important to keep this in mind as if you are going to be purchasing through the program and you end up selling down the road, CMHC will receive back 5% to 10% (depending on the amount you receive) of the market value of your home at the time you sell.
Not everyone will qualify.
To qualify you must meet the following criteria:
Be a Canadian citizen, permanent resident or non-permanent resident who is legally authorized to work in Canada
Borrowers must have a maximum qualifying income of $120,000
Total qualifying income must be $120,000 per year or less
At least one borrower must be a first-time homebuyer
Due to the above criteria, many people will not be able to take advantage of the program.
The incentive may have higher costs.
The Incentive may be associated with additional costs. For example:
Additional legal fees: Your lawyer is closing 2 mortgages so you may be charged higher fees.
Appraisal fees: To repay your incentive, you may need to have an appraisal done to value determine the fair market value of your home.
Other fees: Additional fees may be incurred throughout the life cycle of the incentive, like switching your first mortgage to a new lender or refinancing your first mortgage.
It doesn’t work in every market.
In a recent study by Zoocasa, it was brought to light that with the maximum qualifying income and the required 5 percent down payment, only 19 cities across the country would be eligible. The program is currently operating across 25 cities but only 19 of those would qualify. The program will mainly help those in the prairies, Quebec and smaller urban centres in Ontario.
It can save you money monthly on mortgage payments.
Here is an example of how the incentive can potentially help you save monthly:
Anita wants to buy a new home for $400,000 and has saved the minimum required down payment of $20,000 (5% of the purchase price).
Under the First-Time Home Buyer Incentive, Anita can apply to receive $40,000 in a shared equity mortgage (10% of the cost of a new home) through the program.
This lowers the amount Anita needs to borrow and reduces the monthly expenses.
As a result, Anita’s mortgage is $228 less a month or $2,736 a year.
Overall, there are many different aspects to the program that first time home buyers should be aware of. If you have any questions or would like to learn more, contact our team at anytime 705-739-3432!