First-Time Home Buyer Incentive
Buying your first home?Then this program is for you.
The First-Time Home Buyer Incentive is a Government of Canada program that helps qualified first-time home buyers lower their monthly mortgage costs, making home ownership more affordable. For buyers who qualify, the government puts up 5% of the price of a resale home, or either 5% or 10% of the price of a newly constructed home. The incentive is a second mortgage on the title of the property, but no regular principal payments are required. The loan is interest free, and it can be repaid at any time without incurring penalties.
Am I Eligible?
- You are a Canadian citizen, permanent resident or a non-permanent resident who is legally authorized to work in Canada.
- You have the minimum down payment (5% of the first $500,000 and 10% of any amount over $500,000)
- Your maximum combined income of all borrowers on title does not exceed $120,000
- Your total borrowing is no more than four times the qualifying income ($480,000 maximum)
- At least one borrower is a first-time home buyer.
How Does It Work?
The Incentive’s shared-equity mortgage is one where the government has a shared investment in the home. As a result, the government shares in both the upside and downside of the property value. This means, whether you receive a 5% or 10% incentive, you will have to repay 5% or 10% of the value of your home at the time of the repayment.The home buyer must repay the Incentive after 25 years, or when the property is sold, whichever comes first. The home buyer can also repay the Incentive in full any time before, without a pre-payment penalty.
How much do I have to pay back?
Whatever percentage you were allotted (5% or 10%) is what you’ll have to pay back on the value of the home at the time of the repayment. If the value of your home increases, then your payback amount will be more than the incentive you received. If the value of your home decreases, you will still have to repay the full value of the incentive, based on the current value of the home at the time of repayment.
Here’s an example:
Let’s say you took the 5% incentive on a home priced at $200,000, which would be $10,000. If you sell your home for $300,000 or its value increased to $300,000 at the 25-year mark, you would have to repay 5% of the current value, or $15,000. On the flip side, if the home’s value decreased to $100,000, you’d only have to repay $5,000.