Buying your first home can be nerve-wracking and perplexing, as you don’t necessarily know the market and the real estate lingo. Are there programs aimed towards First-Time Home Buyers or any incentives out there?
As of September 2nd, 2019, the new federal First-Time Home Buyer Incentive program (FTHBI) came into effect. This program does not replace the existing RRSP Home Buyer’s Plan (HBP), it is an incentive to help first-time homebuyers reduce their monthly mortgage costs without increasing their down payment. Through this program, there is no interest in the loan and the loan does not require ongoing repayments. This incentive is aimed at young Canadians who desire to get their foot on the property ladder, without paying a high mortgage; as well as a high down payment.
The First Time Home Buyer Incentive (FTHBI) program offers:
●5% towards the down payment of a resale home;
●5% or 10% towards the down payment of new builds.
The First-Time Home Buyer Incentive program will provide funding as a “shared equity loan” which means that the Government of Canada fundamentally becomes part owner of your home (5% or 10%) sharing in the ups and downs of the property value.
You can repay the incentive at any time in full within the 25 years without a pre-payment penalty. You must repay the incentive after 25 years or if you sell the property, whichever comes first. The repayment is based on the property’s fair market value.
●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 you would pay back 5% of the current value of $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, you would pay back the 10% of the current value of $15,000.
The types of properties that you can purchase through this incentive are:
●New and Re-sale mobile/manufactured homes
Residential properties can include 1 to 4 units:
So how do you qualify? First, you must have the minimum down payment to be eligible. Secondly, your maximum household income is no more than $120,000. Lastly, your total borrowing is limited to four times the qualifying income.
Please Note: that the property must be in Canada and must be suitable and available all year-round. You can not use this incentive if you are planning on renting the property. The Government of Canada has allocated $1.25 billion over three years and more details will be released later in the year.
This incentive program is unlikely to help first-time buyers purchase a home in an expensive city like Vancouver or Toronto; as your household income needs to be higher than $120,000 to afford a home in one of these expensive cities. The average price per sq. meter to buy an apartment in the city center in Vancouver starts at $12,401.13 and outside the city starting at $9,400.89 per sq. meter. In Toronto the average price per sq. meter to buy an apartment in the city center starts at $10,658.43 and outside the city starting at $8,506.95 per sq. meter. This makes it impossible for renters and young adults still living with their parents to afford their first home.
This incentive program would help immensely in areas like Port Alberni on Vancouver Island, BC where the average price per sq. meter is $1,300 to buy in the center of Port Alberni and $1,200 per sq. meter for outside of Port Alberni. An incentive program like this would help the first-time homebuyers in Port Alberni purchase their first home without a large mortgage and down payment hanging over their heads and in time bringing more first-time homebuyers to Port Alberni as our housing prices are one of the lowest and most affordable in BC and Canada. As an average single-family home costs $322,000 in Port Alberni Vs an average single-family home in Vancouver costs $1,200,000. Now that’s something to think about!