Amidst the many mortgage rule changes in the last few years, the “First-Time Home Buyer Incentive” has been offered by the Government. The total amount of funding set aside will be $1.25 billion over 3 years. Applications for this Incentive have been accepted since September 1, 2019, for owner-occupied home purchases closing on or after November 1, 2019.
This incentive can help qualified first-time homebuyers reduce their monthly mortgage carrying costs without adding to their monthly financial burdens. The Incentive is not interest-bearing and does not require ongoing repayments. There are no additional monthly payments.
In order to be eligible for the Incentive:
- • You must be a first-time homebuyer. That means you either:
- o Have never owned real estate or
- o Have not owned a home in at least the last 4 years or
- o Are recently divorced/separated
- • You need to have the minimum down payment
- o 5% for a single-family home or owner-occupied a duplex
- o 10% for an owner-occupied triplex or fourplex
- • Your maximum qualifying income (combined for all applicants) can be no more than $120,000 (gross income)
- • Your total mortgage amount can only be up to 4 times the qualifying income (maximum mortgage amount $480,000)
- • Investment properties are not eligible
- • The total of your down payment and the Incentive add up to less than 20% of the purchase price (it has to be a qualified, insured CMHC, Genworth, or Canada Guaranty mortgage)
How does it work?
If you can provide your down payment and you qualify for the Incentive, then the Government of Canada provides:
- • 5% or 10% down payment for a first-time buyer’s purchase of a newly constructed home (Government will match your 5% or 10%)
- • 5% down payment for a first-time buyer’s purchase of an existing home
- • The Incentive is registered by your lawyer as a lien on your property
How and when do you pay it back?
- 1. You can repay the Incentive at any time in full without a pre-payment penalty.
- 2. You have to repay the Incentive after 25 years or if the property is sold, whichever happens first.
- 3. The repayment amount of the Incentive is based on the property’s fair market value. If your Incentive amount was 5% of your purchase price, then you would have to pay the government 5% of the current market value of your property at the time you sell and/or pay it back.
NOTE: If your property value goes down, you still only repay 5% of the current market value at that time of repayment. The government will share the loss!
To discuss your mortgage options or for more information, feel free to make an appointment or apply online at jmacdonald.ca.
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