Buying your first home is an exciting time. The First-Time Home Buyer Incentive is offered through the Government of Canada with the aim of increasing affordability for first-time buyers. It does this by providing an additional 5% or 10% down payment (allowing you to lower your mortgage carrying costs - ie mortgage payment - and increase affordability). This is a shared equity program, meaning the government will share in the upside and downside of the property value. You pay back the same percentage of the value of the home when you sell it or within a 25-year window).
How it works:
You receive a 5% incentive of the home's purchase price of $200,000 or $10,000. If your home value increases to $300,00 your payback would be 5% of the current value or $15,000.
You receive a 10% incentive of the home's purchase price of $200,000 or $20,000 and your home value decreases to $150,000, your repayment value would be 10% of the current value or $15,000.
You're considered a First-Time Home Buyer if:
- you have never purchased a home before
- you did not occupy a home that you or your current spouse or common-law partner owned in the last 4 years (the 4-year period begins on January of the fourth year before the Incentive is funded and ends 31 days before the date of the Incentive is funded)
- you have recently experienced the breakdown of a marriage or common-law partnership (even if you don't meet the other first-time home buyer requirements)
- your total annual qualifying income doesn't exceed $120,000
- your total borrowing is no more than 4 times your qualifying income
- you or your partner are a first-time home buyer
- you are a Canadian citizen, permanent resident or non-permanent resident authorized to work in Canada
The incentive is like a second mortgage on your home. Your first mortgage must be greater than 80% of the value of the property and is subject to a mortgage loan insurance premium. It must also be eligible through one of the default mortgage insurance providers (Canada Guaranty, CMHC or Sagen).