What you need to know about the new First-Time Home Buyer Incentive, with David Stasica. David is a REALTOR® working in Winnipeg, Manitoba at Royal LePage Alliance.
Introduction of The First-Time Home Buyer Incentive
Near the end of 2019, the Government of Canada established the First-Time Home Buyer Incentive, which is designed to help as many citizens as possible achieve their desired goal of home ownership.
This program is for those who are looking to purchase their first home, and would like assistance in reducing the monthly payments – without increasing their down payment on the home.
What is the Home Buyer Incentive?
This program is a shared equity mortgage. It allows you to borrow 5% or 10% of the purchase price of a home. The incentive isn’t interest-bearing, and you don’t need to make ongoing payments. Essentially, the Government of Canada is sharing both the upsides and the downsides of the property’s equity with you.
The incentive can be paid back either after the 25 years have elapsed; when the property is sold; or pre-paid at your convenience, without penalty. The repayment amount will be based on the property’s fair market value so, for example, if your home loses value, you won’t be required to pay based on your original purchase price. This, of course, means that if the value of the home increases, you’ll be on the hook for a larger payment.
Here is an example of how the incentive works:
- You receive a 5% incentive of the home’s purchase price of $250,000, or $12,500. If your home value increases to $300,000, your payback would be 5% of the current value or $15,000.
- You receive a 10% incentive of the home’s purchase price of $250,000, or $25,000. If your home value increases to $300,000, your payback would be 10% of the current value or $30,000.
This incentive is ideal for those who want to purchase a home, but would be unable to save for a larger down payment or take on a large monthly mortgage. It’s limited to first-time home buyers because those who already own a home presumably have equity or savings from their previous purchase.
Who Qualifies for The Home Buyer Incentive?
There are a few qualifications for this program, which are as follows:
- Down Payment: Your must already have saved the minimum down payment that your lender will allow for the particular house that you are seeking to purchase;
- Maximum Income Requirements: If your household earns more than $120,000, you would be ineligible to participate, as this is the maximum qualifying income;
- Price Limits: You can only borrow four times your maximum qualifying income. So, for example, if your income is $50,000 per year, you can borrow up to $200,000. If you make $120,000 per year, that soars to $480,000;
- Citizenship: Canadian citizens, permanent residents and non-permanent residents who are legally authorized to work in the country can apply for this incentive;
- First-Time Home Buyers (and beyond): If you or your partner have never purchased a home before, you qualify for the incentive. Additionally, if you’re experiencing the dissolution of marriage or common-law partnership, you’re eligible even if you have already owned a home before.
Finally, you are also eligible if, in the last four years, you did not occupy a home that you or your current spouse or common-law partner owned.
David is a REALTOR® working in Winnipeg, Manitoba at Royal LePage Alliance. If you are looking to purchase a home within the near future or have any specific questions regarding the Winnipeg real estate market, please feel free to contact me today using the number or e-mail address below!