Earlier this year, the Government of Canada released its 2019 Federal Budget, including the controversial and completely new First-Time Home Buyer Incentive Program. As this program is unlike anything else currently available, we are sharing the details of the incentive released by CMHC today, below.
To re-cap, there were two mortgage-related changes included in the 2019 Budget, both aimed at improving first time homebuyers’ opportunities to enter the housing market. These are:
- Increase to the amount that an individual first time homebuyer may withdraw from their RRSP’s for the purpose of purchasing their first home. Previously, the maximum one could withdraw was $25,000, but now the maximum withdrawal amount has been increased to $35,000. This increase acknowledges the higher costs housing costs and assists homeowners in accessing more low-cost funds to help with their first home purchase. You can download the most recent ‘Home Buyers’ Plan Request to Withdraw Funds from an RRSP’ here.
- The First-Time Home Buyer Incentive is an interest-free loan provided by the Government of Canada, which is intended to help reduce the monthly payment, improving cash-flow as a result.
As Licensed Mortgage Professionals, we assist you in determining whether these programs, and others, will be right for you. We provide individualized qualification & credit assessments at no cost to you. Simply Apply Today; and one of our team will be happy to get things started right away!
You need to have the minimum down payment to be eligible. You can then apply for a 5% or 10% shared equity mortgage with the Government of Canada. Your maximum qualifying income is no more than $120,000 and your total borrowing is limited to 4 times the qualifying income.
The Incentive has an equity-like payout, where the government would share in the upside and downside of the property value.
The First-Time Home Buyer Incentive launches September 2, 2019*.
* Barring any unforeseen circumstances the program will launch on September 2, 2019. The first closing will take effect on November 1, 2019.
Eligibility & Requirements
Let’s look at a specific situation
Anita wants to buy a new home for $400,000.
Under the First-Time Home Buyer Incentive, Anita can apply to receive $40,000 in a shared equity mortgage (10% of the cost of a new home) through the program. This is on top of the minimum required down payment of $20,000 (5% of the purchase price) from her savings.
This lowers the amount she needs to borrow and reduces her monthly expenses.
As a result, Anita’s mortgage is $228 less a month or $2,736 a year.
* This example is for illustrative purposes only. Anita will need to repay the incentive at 10% of the fair market value when she sells the property or after 25 years, whichever is earliest.
Here’s another situation
John has an annual qualifying income of $83,125.
To be eligible for Canada’s First-Time Home Buyer Incentive, he can purchase a home up to $350,000. John still has the required minimum down payment of 5% of the purchase price, $17,500 from his savings. He can receive $35,000 in a shared equity mortgage — 10% of a newly constructed home.
This would reduce John’s mortgage payments by $200 a month or $2,401 a year.
* This example is for illustrative purposes only. John will need to repay the incentive at 10% of the fair market value when he sells the property or after 25 years, whichever is earliest.