What is the First-Time Homebuyer Incentive?
By Alterna Team
November 22, 2021

The first-time homebuyer incentive is an interest-free loan offered by the Canada Mortgage and Housing Corporation (CMHC), a branch of the federal government. This program offers qualified first-time homebuyers to help decrease their regular mortgage payments. It contributes up to 10% of the home's total cost and aims to allow first-time homebuyers to save a significant amount of money throughout their mortgage term. This type of incentive is called a shared equity mortgage in the financial industry. Essentially, what that means is that the CMHC will be part owner of your home.

What is a shared equity mortgage?

A shared equity mortgage means that a second party – in this case, the CMHC, shares ownership of your home. If you use the full 10% option, it would mean that the CMHC, owns 10% of your home. However, that doesn't mean the government has access to your home – you don't have to worry about having them as housemates!

How long do I have to pay back the loan?

You'll need to pay back the CMHC contribution within 25 years or when you sell the home, whichever comes first. The incentive amount is interest-free; however, the amount of money you'll need to pay back will fluctuate alongside the value of your home.

Example: If you bought a home worth $750,000 today, a 10% CMHC contribution would be $75,000. If you pay back the CMHC contribution when the house has increased in value to $900,000, that 10% would be 90,000, and that's how much you'd be required to pay back. However, this percentage works both ways, so if your home decreases in value, you will pay back less than you initially borrowed.

Who is eligible for the first-time homebuyer incentive?

Here are the four primary requirements for qualifying for the first-time homebuyer incentive.

First-time homebuyer: This is slightly more complicated than it sounds. It specifies that you have never owned a property anywhere in the world and have not lived in a home owned by your spouse or common-law partner in the last four years.

Household income: You and your partner's combined income must be less than $120,000 in most parts of Canada, and under $150,000 in Toronto, Vancouver and Victoria, in order to qualify.

Maximum mortgage amount: Your total borrowing can be no more than 4 times your household income, or 4.5 times your household income if the home you are purchasing is in Toronto, Vancouver or Victoria. Since your household income must be less than $120,000 or $150,000 to be eligible for the incentive, the maximum mortgage amount for borrowers hoping to capitalize on this program is $480,000 or $600,000.

Minimum down payment: For properties worth less than $500,000, the minimum down payment requirement is 5%. For properties worth between $500,000 - $1M, the minimum down payment is 5% of the first $500,000 and 10% of the rest. The incentive amount is not considered part of the down payment.

For more detail visit the following website: https://www.placetocallhome.ca/fthbi/first-time-homebuyer-incentive

Is the first-time homebuyer incentive right for you?

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