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Is the First-time Home Buyer Incentive Right for You?

To make it easier for first-time homebuyers to get into the market, the federal government unveiled an incentive where the government contributes to the purchase of the home through a shared mortgage. This allows a potential homeowner to access 5% or 10% depending on whether your home is being purchased as resale or a new build. Not only will this allow you to boost your down payment, it means lower monthly carrying costs.

What is a shared mortgage? By participating in the incentive, you are sharing your mortgage with the government. That means the government also shares the risk. For example, if you access 5% of the purchase price of a home through the incentive and the home’s value is $500,000, the government’s 5% share is worth $25,000. If the home is sold for $600,000, you must pay the government back $30,000. However, if the value of the home goes down, you pay back less. If the home is sold for $400,000, your repayment is $20,000.

To take advantage of the program, both you and the property must be eligible. It cannot be an investment property  According to the Government of Canada’s website:

  • Your total annual qualifying income must not exceed $120,000 ($150,000 if the home you are purchasing is in Toronto, Vancouver, or Victoria).
  • Your total borrowing must be no more than 4 times your qualifying income (4.5 times if the home you are purchasing is in Toronto, Vancouver or Victoria).
  • You or your partner must be a first-time homebuyer.
  • You must be a Canadian citizen, permanent resident or non-permanent resident authorized to work in Canada.
  • You must meet the minimum down payment requirements with traditional funds (savings, withdrawal/collapse of a Registered Retirement Savings Plan (RRSP), or a non-repayable financial gift from a relative/immediate family member).
  • The property must be in Canada and used for you to live in.

To learn more about participation requirements, how to apply, repayment structure and other important details, visit www.placetocallhome.ca/fthbi/first-time-homebuyer-incentive

Click here for the eligibility and savings calculator.

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