(Also known as influencing your votes for the upcoming October federal election.)
Effective September 2, 2019, the Government of Canada will introduce the First Time Home Buyer Incentive (FTHBI) to help qualified First Time Home Buyers (FTHB) purchase a home, making homeownership more affordable by reducing their monthly mortgage payment without increasing their down payment.
The FTHBI is considered a Shared Equity Mortgage (SEM) where the Government of Canada has a shared interest in the borrower’s property value. This program is available through the default insurers; Canada Mortgage Housing Corporation (CMHC), Genworth and Canada Guaranty. Borrowers will receive an incentive in the form of an interest-free loan towards their down payment:
· 5% for the purchase of a resale property OR
· 5% or 10% for the purchase of a new construction home
The borrower must be a Canadian Citizen, Permanent Resident or Non-Permanent Resident who is legally authorized to work in Canada.
At least one borrower must be considered a FTHB based on the qualifying criteria.
Property must be owner occupied and located in Canada.
Borrowers must contribute the minimum required down payment from traditional sources.
Default insurance premiums will be calculated based on the purchase price less the borrower’s own down payment and the FTHBI amounts.
The loan has no monthly payment. Repayment amount will be based on fair market value to be determined at the time of repayment.
o Repayment will be required when the property is sold or at the end of the 25-year term, whichever happens earlier.
o Voluntary repayment of the full incentive can be made without any prepayment penalties.
Application Process Requirements
In addition to the signed privacy agreement and credit application, customer must provide a signed original or signed copy of the ‘FTHBI Program Attestation, Consent and Privacy Notice’ at the time of application. This form can be found on the FTHBI website.
Application must be submitted on or after September 2, 2019, and the closing date must be on or after November 1, 2019.
o Only High Ratio mortgages (greater than 80% Loan-to-Value) are eligible and the borrower’s annual qualifying household income does not exceed $120,000.
o The combined mortgage loan amount and incentive cannot exceed four times the total annual qualifying income.
What does this mean? The maximum amount of house you can buy is $480,000. In the City of Toronto… that’s barely a condo. Sure, you could try your best to find something in the suburbs, but you won’t find your average detached home unless you’re far, far away from the city’s core. (And I mean very far.)
The interesting part about this is you’re essentially partners with the government. Not necessarily a bad thing. If the price appreciates, they earn their share. If the price drops…
Questions — let me know and I’ll connect you with one of my experienced mortgage brokers so they can help you.