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First-Time Home Buyer Incentive

By sedoo

Recently, the Federal government introduced the First-Time Home Buyer Incentive (“Incentive”). The Incentive aims to help qualified first-time homebuyers reduce their monthly mortgage costs.

 

The Incentive consists of the Government of Canada providing a potential funding of 5% of the home’s purchase price for a first-time buyer’s purchase of a re-sale home or 5% or 10% of the home’s purchase price for a first-time buyer’s purchase of a new construction home.  The Incentive is a shared equity mortgage, and this means that the government shares in the upside and downside of the property value.

 

Applications for the Incentive may be discussed with and provided to your mortgage lender on or after September 2, 2019 and the first available closing for the Incentive is expected to be November 1, 2019.

 

To qualify for the Incentive, you must meet certain qualifiers, such as:

  • you need to have the minimum down payment;
  • your maximum qualifying income is no more than $120,000;
  • your total borrowing is limited to 4 times the qualifying income;
  • at least one homeowner must be a first-time homebuyer;
  • you must have the intent to occupy the property (investment properties are not eligible).

 

There are useful resources available to see if you qualify for the Incentive and how it may assist with lowering your mortgages payments. To see if you are eligible for the Incentive you may access the eligibility calculator at: https://www.placetocallhome.ca/fthbi/eligibility-savings-calculator

 

The Incentive is a second mortgage on the title of the purchased property and there are no regular principal payments that must be made.

 

The Incentive can be paid back at any time in full and without a pre-payment penalty and the Incentive must be repaid after 25 years or if the property is sold, whichever occurs first.

 

There may be additional costs associated with the Incentive, for example:

  • Additional legal fees: There will be 2 mortgages on your home closing, so you will likely be charged additional legal fees and disbursements.
  • Appraisal fees: To repay your Incentive, you may be required to have an appraisal completed to determine the fair market value of the home.
  • Other fees: Additional fees may be incurred throughout the Incentive period. For example, if you change your existing first mortgage to a new first mortgage lender or refinancing your first mortgage. Your lawyer will likely have to obtain a postponement of the Incentive mortgage to the new first mortgage which means more legal fees and disbursements.

 

The Incentive may be a great tool to assist you with purchasing your first home. For further information on the Incentive you may contact our office and discuss with your mortgage lender.

 

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Seth D. Freedman is an Associate with Kormans LLP. His practice areas include residential and commercial real estate, corporate and commercial law, and wills and estates. You can reach Seth at sfreedman@kormans.ca

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