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Sep 2022

First Time Home Buyer Incentive Program

By Brooklyn Lester and Slonee Malhotra

As part of Canada’s first ever National Housing Strategy (a 10 year, $70+ billion plan to strengthen communities and cut chronic homelessness in half) the Government of Canada has created the First Time Home Buyer Incentive Program.

What Is It?

The First Time Homebuyer Incentive Program (“the Program”) was designed to help people across Canada purchase their first home. The program offers as a loan a certain percentage of the purchase price (5% or 10% depending on the type of property) to put towards a down payment. This lowers your mortgage carrying costs, making homeownership more affordable.

The Program is a shared equity instrument, operating as a second mortgage on your home.

Eligibility 

In order to qualify for this incentive, you must satisfy all of the bellow conditions: 

  • Your total annual qualifying household income doesn’t exceed $120,000 ($150,000 if the home you are purchasing is in Toronto, Vancouver, or Victoria*). Please note that if one party is the applicant and a second party will be added to title (i.e. a spouse or parent), the combined income of all parties on title cannot exceed the qualifying amount;
  • Your total borrowing is no more than 4 times your qualifying household income (4.5 times if the home you are purchasing is in Toronto, Vancouver or Victoria*);
  • You or your partner are a first-time homebuyer;
  • You are a Canadian citizen, permanent resident or non-permanent resident authorized to work in Canada;
  • You meet the minimum down payment requirements with traditional funds (savings, withdrawal/collapse of a Registered Retirement Savings Plan (RRSP), or a non-repayable financial gift from a relative/immediate family member);
  • The first mortgage must be greater than 80% of the value of the property;
  • The property must be suitable and available for full-time, year-round occupancy where you as the purchaser will reside.

*The program offers higher incentives for homebuyers in the Toronto, Vancouver or Victoria Census Metropolitan Areas.

Who Is A First Time Homebuyer?

The Program defines you as a first-time home buyer if:

  • You have never purchased a home before (including an investment property); and
  • You did not occupy a home that you or your current spouse or common-law partner owned in the last 4 years (the 4-year period begins on January 1 of the fourth year before the Incentive is funded and ends 31 days before the date the Incentive is funded); OR
  • You have recently experienced the breakdown of a marriage or common-law partnership (even if you don’t meet the other first-time home buyer requirements).

How much will I get?

The amount you get depends on the type of property you purchase:

Property Type

Incentive Amount (% of purchase price)

New Construction

5% or 10%

Existing Home

5%

New and existing mobile/ manufactured home

5%

How To Apply

In order to apply for this incentive, you should find the home you’re looking for and get pre-approval for your mortgage. If you’re eligible for the Program, at this stage you should apply. There are two application forms available online.

Once these forms are complete, give the forms to your lender (mortgager). They will submit the application for you. Be sure to give the final signed copy of the shared equity mortgage package to your lawyer. If you are accepted for the program call FNF Canada at 1-(855) 844-4535 to activate your incentive and provide the name of your lawyer/notary. (This must be at least 2 weeks prior to your closing date.)

Repayment 

It is essential to understand the conditions for repayment. The incentive must be paid in full after 25 years or when the home is sold. There are no partial payments. However, some actions (such as refinancing) may trigger repayment.

The incentive works by borrowing from the government either 5% or 10% of the down payment for your home. Upon repayment you would pay the Government either 5% or 10% respectively of the homes market value, subject to maximum repayment amounts of:

  • If the home appreciates in value: Incentive amount plus a maximum gain to the Government of 8% per annum (not compounded), OR
  •  If the home depreciates in value: Incentive amount minus a maximum loss to the Government of 8% per annum (not compounded).

More Information / Helpful Links 

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