Understanding Canada's First-Time Home Buyer Incentive
As of September 2019, the Canadian Government has instituted a new First Time Home Buyer’s Incentive to help new homebuyers find their first homes in Canada. It helps qualified first-time buyers reduce their monthly mortgage costs without adding to their financial burdens. Today, Envision Realty will help walk you through this helpful new tool so you can better understand the mortgage system.
What is the First-Time Home Buyer Incentive?
The Canada-wide incentive allows first-time home buyers to apply for an interest-free loan from the Canada Mortgage and Housing Corporation. They will offer 5% towards an existing home or 10% towards a new build. Having these additional funds for your down payment will also likely help lower mortgage payments going forward.
You have to repay the incentive loan after 25 years, or if the property is sold. The repayment of the incentive is based on the property’s fair market value. Example:
You receive a 5% incentive of the home’s purchase price of $200,000, or $10,000.
If your home value increases to $300,000 your payback would be 5% of the current value or $15,000.
This goes both ways, whether the price of the home lowers or raises, so if the property value goes down, you will be repaying less.
Additionally, the government is increasing the amount first-time home buyers can withdraw from the RRSPs in order to finance their purchase. The previous limit was $25,000, and it is now $35,000 per individual.
How to Qualify for the First-Time Home Buyer’s Incentive:
If everything lines up for your situation, you can apply for the First-Time Home Buyer’s Incentive by visiting this website (https://www.placetocallhome.ca/fthbi/first-time-homebuyer-incentive#9). Read, print, and sign the application documents in the resources section and take them to your mortgage lender to move forward.
First-Time Home Buyer Tools
To make the process even easier, the government has recently released a handful of new tools and resources on the First-Time Home Buyer Incentive Program. Here are a list of items and links for your perusal.
Eligibility Calculator – test and evaluate different financial scenarios and see their impact on your mortgage payments
Product Highlight Sheet – a summary of key program details
Journey Map – breaks down the application process step by step
Application Process Diagram – shows the interactions between all parties involved.
If you have any questions on the process, or if you’re looking for help with applying for mortgage, feel free to contact us. At Envision Realty we specialize in both real estate and mortgage and we’d be happy to help.
We hope this has helped you better understand the new first-time home buyer’s incentive. Happy house-hunting!