The First-Time Home Buyer Incentive 2.0 launched on May 3rd , 2021
It’s actually happening. Canada’s First-Time Home Buyer Incentive (FTHBI) comes into effect today and it will make it a whole lot easier for young people to buy homes.
As this will lower the mortgage payments, many families will save hundreds of dollars more each month means more money to spend on healthy food, sports activities, kids, or even save for the future and improve the overall quality of life.
There are a few qualifiers to apply for this incentive:
- Applicants must be a First tIme Buyer OR must not have owned a house in the last four years – exceptions will be made for those in a "breakdown of marriage or common-law partnership
- You need to have the minimum down payment to be eligible.
- Your maximum qualifying family income should be no more than $120,000 before taxes and deductions ($150,000 in Toronto,Vancouver & Victoria)
- Your total borrowing is limited to 4 times your income (4.5 times in Toronto,Vancouver & Victoria)
If you meet these criteria, you can then apply for a 5% or 10% shared equity mortgage with the Government of Canada. A shared equity mortgage is where the government shares in the upside and downside of the property value.
How does it work?
The Incentive enables first-time homebuyers to reduce their monthly mortgage payment without increasing their down payment. The Incentive is not interest bearing and does not require ongoing repayments.
Through the First-Time Home Buyer Incentive, the Government of Canada will offer:
- 5% for a first-time buyer’s purchase of a re-sale home
- 5% or 10% for a first-time buyer’s purchase of a new construction
How do I know how much I have to pay back?
The loan must also be paid back under three circumstances, whichever happens earlier:
- If you re-finance your home;
- if you sell your home;
- or at the end of 25 years.
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.
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 will be 10% of the current value or $15,000.
NOTE: If your property value goes down, you are still responsible for repaying the shared equity mortgage based on the current home value at time of repayment.
Some Examples for you :-
Smith has an annual income of $100,000. He wants to buy a $500,000 home and he has minimum downpayment of 5% ($25,000) .
SCENARIO#1 (Without Incentive): Monthly Mortgage Payment :$1975
SCENARIO#2 (With First Time Buyer Incentive) : Monthly Mortgage Payment : $1855 (Savings of $120/month)
John has an annual income of $150,000. He wants to buy a $650,000 home and he has minimum downpayment of 6.15% ($32,500).
SCENARIO#1 (Without Incentive): Monthly Mortgage Payment :$2536
SCENARIO#2 (With First Time Buyer Incentive) : Monthly Mortgage Payment : $2381 (Savings of $155/month)
Use this CALCULATOR to review different scenarios.
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