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!
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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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