What is the First-Time Home Buyer Incentive program?
The First-Time Home Buyer Incentive (FTHBI) is a shared equity mortgage being offered by the federal government, in which they invest in the property with you. They’ll lend you 5% of the purchase price if you are buying a resale property and 10% of the value of the property, if it is new construction. There are no monthly payments, no interest is charged and repayment of the loan is the earlier of you selling the property or 25 years.
Under this shared equity mortgage program, the federal government shares in the upside and also the downside of the value of your property. The loan amount to be repaid will be based on the value of the property at the time of repayment and is either 5% or 10% of this value, depending on whether your purchase was a resale or new construction.
If the value of your property INCREASES at the time of repayment then you will owe MORE because your incentive percentage is based on that higher property value. Alternatively, if the value of your property DECREASES at the time of payment, then you will owe LESS because the incentive percentage is based on the lower value.
As an example, when you purchased your property you bought it for $500,000 and now it’s now worth $600,000, then the 5% or 10% is based on the $600,000 value. There is no penalty to payoff the loan and it can be paid off anytime.
When does this incentive program start?
The FTHBI launches September 2, 2019 and you just need to make sure your purchase closes November 1, 2019 or later
Who is eligible?
There are a few qualifiers to apply for the FTHBI:
- you need to have the minimum down payment
- total household income is no more than $120,000
- mortgage and incentive amount cannot exceed 4 times the qualifying income (the mortgage insurance premium is excluded from this calculation)
- must be purchasing a primary residence
- need to be considered a first time buyer
You are considered a first-time home buyer if you meet one of following qualifications:
- you’ve never purchased a home before
- you have gone through a breakdown of a marriage or common-law partnership (even if you don’t meet the other first-time home buyer requirements).
- in the last 4 years, you did notoccupy a home that was occupied by the homebuyer or their spouse
Example of the First Time Home Buyer Incentive
Purchase price $520,000, annual income of $120,000, down payment of $40,0000, property is resale (5% incentive) and mortgage rate is 2.59%
Without Incentive With Incentive
Purchase price $520,000 $520,000
Downpayment – 40,000 – 40,000
First Time Buyer Incentive 0 – 26,000
Mortgage Amount $480,000 $454,000
Mortgage Insurance + 19,200 + 14,074
Total Mortgage $499,200 $468,074
Mortgage Payments $2,262.19 $2,121.14
Annual Savings 0 $1,692.62
If you held the property for 5 years before selling, your total savings would be $8,463.10 ($1,692.62 x 5 years) and your repayment would be 5% of the sale price.
FTHBI and the Vancouver Market
According to recent calculations by Zoocasa, if you’re looking to purchase a benchmark-priced house in Metro Vancouver markets using the FTHBI, you’re probably out of luck.
However, for condo buyers, there are some options available in seven markets, outside of the downtown core. Here, benchmark apartment prices could qualify for the FTHBI, assuming a home buyer qualifies based on total household income of $120,000 and has saved the required 5% down payment. Home prices were sourced from the Real Estate Board of Greater Vancouver and the Fraser Valley Real Estate Board for the month of June 2019.
Maple Ridge: $355,200
North Delta: $377,900
Surrey (excluding South Surrey) and Langley: $416,400
Port Coquitlam: $446,500
Pitt Meadows: $498,400
White Rock / South Surrey: $500,100
For more information, please contact
Maureen Young
Senior Mortgage Advisor
Dominion Lending – Origin Home Financial Partners
Phone 604 805-5888
Email maureen@maureenyoung.ca
Web http://www.maureenyoung.ca