Canada’s First-Time Home Buyer Incentive: Everything You Need to Know
For the first time in years, Canada’s first-time buyers have a reason to feel optimistic. September 2, 2019, marked the launch of the Canadian Mortgage and Housing Corporation’s all-new First-Time Home Buyers Incentive (FTHBI), a financial incentive designed to help middle-class Canadians buy their first property.
The Perfect Time for the FTHBI
The timing for the FTHBI couldn’t be better. Fixed mortgage rates remain at an all-time low. Most markets across the country are balanced or even a little soft.
“The First Time Home Buyer Incentive will reduce the monthly mortgage for your first home by up to $286,” says Jean-Yves Duclos, Minister of Families, Children and Social Development and Minister Responsible for Canada Mortgage and Housing Corporation. “This will help up to 100,000 families across Canada to buy their first home.”
How Does the FTHBI Work?
In effect, the FTHBI reduces their monthly mortgage payment without increasing the amount they need to save for the down payment. First-time buyers can finance a portion of their purchase through a form of shared equity mortgage with the Government of Canada. Home buyers will still have to pass the B-20 stress test and have mortgage pre-approval and mortgage approval.
“No doubt, some first-time buyers will benefit, and we’ll have to wait and see just how many families it affects,” says Paul Taylor, President and CEO, Mortgage Professionals Canada, Toronto.
Who Qualifies for the FTHBI
For years now, unaffordable, astronomical properties have been getting all of the attention. In reality, those homes co-exist with some reasonably-priced, affordable homes in the very same cities, including Toronto, Montreal and Vancouver. Of course, those homes may be smaller apartments, older homes and/or in less desirable neighbourhoods, but they’re out there and may be perfectly suited to first-time buyers and their families.
The Financial Impact of the FTHBI
“CMBA is in favor of the FTHBI because by sharing equity with the government, first-time home buyers in specific segments are able to reduce the cash required for their weekly or monthly payments,” says Vancouver-based Rob Regan-Pollock, senior mortgage broker, Invis Inc., and co-chair of the Canadian Mortgage Brokers Association. “It’s another tool in the quiver for mortgage brokers and agents that are helping first-time home buyers earning less than $120,000 annually get into markets where they can purchase a home for under $500,000.”
Let’s look at the financial impact the FTHBI would have on a family buying a $200,000 and a $500,000 home. With a 5% or $10,000 ($20,000 total with FTHBI) down payment on a $200,000 home, the buyers will save $114 a month or $1,372 a year. If they put $25,000 down ($50,000 with FTHBI) on a $500,000 home, they’ll reduce their monthly payments by $286 a month or $3,430 annually.
Now that you know exactly how the FTHBI could help you achieve your dream of home ownership, you can start planning your future to take advantage of the upcoming federal election, the staggeringly low fixed rate interest and softer markets in various regions of Canada.
By Kara Kuryllowicz