First-Time Home Buyer Incentive

By: Mark Lukwinski

First-Time Home Buyer Incentive

Tags: loans, federal government, shared equity


 
Looking to get into a great home worth around $500,000 will be easier with the help of an influx of $1.25 billion in a home-buyer incentive program which was included in the federal budget.
 
The target of this program are those families with household incomes of $120,000 or less, who could expect to pay about $100-$300 less per month on a mortgage, without having to increase a down payment on a home.  
 
This program went into effect last week on September 2nd and has been implemented to try to get families to take the leap from home rental to home ownership, as well as try and stabilize increasing home prices across Canada.
 
Designed as a shared equity between the home owner and the federal government via mortgage insurance, it is and incentive to get families into homes now and ease their costs but they will be required to pay back the advance upon selling the home, or after 25 years. But, unlike a conventional loan, the applicants will not be charged interest on this loan.
To look and understand it another way, the government is giving a loan to this targeted group of home owners of up to 10% of a home’s purchase price to put towards their down payment, thereby lowering their monthly mortgage costs. You need to be a first-time home buyer or a homeowner ‘who has gone through a divorce or breakdown of a common-law partnership, or those who have not lived in a home that they owned (or that was owned by their spouse or common-law partner) for the past four years.’ (MoneySense 2019).
In addition to your household income, you need to borrow less than four times your qualifying income to be eligible for this program. If you qualify, the government will help you with 5% towards the price of a re-sale home and 10% towards the price of a new one.
Repaying the loan upon house sale or 25 years is a little tricky, because you will be required to pay back the 5% or 10% based on the value of the home at that time, and not the amount you received. Hence why this is called an equity program between you and the government, so essentially the government benefits from an increase in the value of your property, and takes a loss if your value should go down.
Confused? Have more questions? Is this the right path for you? Let’s chat! I’m happy to answer any questions you may have.
 
Mark