07/06/2023
The First-Time Home Buyer Incentive (FTHBI) went into effect November 1, 2019. If you plan to make the a down payment of less than 20% on your first home, the Canadian Mortgage and Housing Corporation (CMHC) will loan you an amount toward the purchase as a second mortgage, with no payments or interest for up to 25 years. The amount available depends on the home your purchasing, if it's a new build, the incentive can be either 5% or 10%. If you're buying an existing home the available incentive is 5%. Your down payment and the incentive together are capped at 19.99%, so with a 10% incentive the maximum down payment you can make is 9.99% and with a 5% incentive the maximum down payment is 14.99%.
What's the catch? You have to share any gains in equity with CMHC when you pay back the amount, though if you lose money on your home CMHC will also share in the losses, in both cases in proportion to the size of the amount you received.
The plan is for those with a total qualifying income of $120,000 per year or less, and your mortgage and incentive must be equal to or less than four times your total gross income.
There are rules around who qualifies to as a first time home buyer and even if you our your spouse has owned a home before you may be considered eligible. If you have owned before but have not occupied a home that you or your partnered owned in the previous four years, you may still qualify. You may also qualify under special eligibility allowances due to the breakdown of a marriage or common-law partnership.
The benefit of the FTHBI for many would be the opportunity to improve cash flow given the interest free and payment free nature of the incentive loan.
Are there other helpful tidbits for first time home buyers to consider besides the RRSP HBP and the FTHBI? There are, but that's a matter for another time.
