The First-Time Home Buyer Incentive is a federal program introduced in the 2019 budget as part of the National Housing Strategy. It is a shared equity mortgage with the Government of Canada, with the goal of reducing your monthly mortgage payment. In the examples provided by CMHC and the scenarios we've run, you can expect your monthly payment to be lowered by $100-$200 versus borrowing the full mortgage amount from a lender. Applications are open as of September 2, 2019.
Do I Qualify for the Incentive?
This program is open to home buyers who meet the following criteria:
- Your annual household income is no more than $120,000
- You have at least 5% down payment for your purchase
- At least one person on title is a first-time home buyer
- You are a Canadian citizen, permanent resident, or non-permanent resident legally authorized to work in Canada
How Much Can I Get Through the Incentive?
The program will provide 5% of the purchase price of the property, or 10% if it is a new build. However, your total borrowing is capped at 4 times your qualifying income. For example, if your total gross household income for you and your spouse is $100,000/year, your maximum mortgage is $400,000 including the amount of the Incentive.
How Does The Incentive Work?
In order to receive the Incentive, you must be approved for a high-ratio first mortgage that is eligible for mortgage insurance through CMHC, Genworth, or Canada Guaranty. The Incentive will be registered as a second mortgage on the title of the property.
The Incentive is not interest bearing and does not require you to make ongoing repayments. You can repay in full at any time without a penalty, but you must repay when the property is sold or after 25 years. The amount you are required to repay is based on an equivalent % of the property value to what was originally received. For example, let's say you purchased your home for $500,000 and received 5% from the Incentive ($25,000); if the value of your property when you sell it is $550,000 you would need to repay 5% of that amount or $27,500. You are still responsible for repayment if the value of your home goes down; to continue the previous example, if your home is only worth $450,000 when you sell it you would repay 5% or $22,500. The government shares in both the upside and downside of the property value.
How Do I Apply?
More details on applying are available on the National Housing Strategy website.
The Auxilium Team keeps track of key developments relating to home ownership in order to provide you with the best possible solution for your situation. If you're considering buying your first home, contact us for a free consultation with one of our underwriters: call 250-590-6520 (toll-free 1-855-590-6520) or visit us at 307 Goldstream Avenue during regular business hours. We can also arrange an appointment evenings or weekends to work with you.
Auxilium Mortgage Corporation is based in Victoria, BC and works with clients locally and across Canada. The Auxilium team has over 100 years of combined financial experience and access to dozens of lenders to help you meet your goals.