First Time Buyer Incentive Now Available

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The new First Time Buyer Incentive came into effect on September 2, 2019. Here are some excerpts.

Do you know of a first-time buyer struggling to save for a downpayment-- maybe a son, a daughter or even yourself--consider looking into this Government Program. It is meant to:

  • Reduce the amount of downpayment needed, as well as

  • Lessen your “monthly mortgage carrying costs.”

Incentive Percentage for Different Property Types:

For New Construction: 5% of 10% of purchase price,

For Resale Homes: 5% of purchase price,

New or re-sale mobile/manufactured homes: 5% of purchase price.

Eligibility Requirements

  1. You are considered a first-time buyer if you have never owned a home, you are going through a marriage or common-law break-down; you and your spouse or common-law partner have not owned a home in the last four years.

  2. You are a Canadian citizen, permanent resident, or a non-permanent resident legally working in Canada.

  3. You must occupy the property; investment properties are not eligible.

  4. Whether applying yourself or with a spouse or friend, the total combined qualifying income must be $120,000 per year or less, whether it comes from investment, rental or work income before taxes.

  5. The mortgage amount and qualifying incentive cannot exceed 4 times the combined income.

  6. The incentive is registered on title as a 2nd mortgage, is not interest bearing, requires no principal payments and has to be repaid in 25 years or when the property is sold, whichever comes first.

  7. Mortgages must be insured by CMHC, Canada Guarantee Mort-gage Insurance or Genworth.

  8. The minimum downpayment must be from traditional source; meaning savings, RRSPs or non-repayable financial gifts from a relative.

CMHC Example of What is Owed if Resale Sold After 5 Years

With Increase In Value

Amount


Original Home Value at Purchase

Buyer Incentive (5% of $400,000)

Assume Market Value at Time of Sale

Repayment: Buyer Incentive of $20,000 + 5% of Equity Gain
($80,000 x 5% = $4,000)

$400,000

$20,000

$480,000

$24,000


With Decrease In Value

Amount


Original Home Value at Purchase

Buyer Incentive (5% of $400,000)

Assume Market Value at Time of Sale

Repayment: Buyer Incentive of $20,000 - 5% of Equity Loss
($68,960 x 5% = $3,448)

$400,000

$20,000

$331,040

$16,552