Posted: 1 Jul '20

Is Canada’s Incentive for First Time Home Buyers Right for You?

Is Canada’s Incentive for First Time Home Buyers Right for You?

The Canadian First Time Home Buyer Incentive (FTHBI) is an initiative that seeks to make it easier for you to own a home, but not everyone qualifies and it can come with some risk. Before deciding to acquire a first time home buyer loan utilizing the First Time Home Buyer Incentive, take time to understand the details. Contact us to learn more. 

Do You Qualify for FTHBI? 

To qualify for FTHBI, you must be a first time homeowner, have undergone a divorce, or have not lived in a home that you owned with your spouse for the past four years.  

On top of this, you must also meet the following criteria: 

  • Your total household income, which included salaries, investments, and rental income, should be lower than $120,000. 

  • The maximum amount you can borrow should be four times your qualifying income. Since the limiting income is $120,000, the most anyone can borrow is $480,000. This means that IF your qualifying income is below $120,000, your loan amount will be even lower

  • You must have the minimum downpayment ready. For the first $500,000 of a home’s purchase price, the minimum downpayment required to obtain a first time home buyer loan is 5%. However, your total downpayment, even with the incentive, should not exceed 20% of the home’s purchase price.  


How Does FTHBI Work with First Time Home Buyer Loans? 

If you qualify, the government will lend you 10% of the purchase price for a newly constructed house or 5% for a previously owned home. The incentive amount can help you settle part of the downpayment and mortgage insurance. Fortunately, there are no interest charges upon repayment, and you do not have to make monthly payments. You do eventually have to repay the same share you received through FTHBI, but not until you sell the home or after 25 years – whichever comes first. Still – pretty great! 

So, what is the catch? The FTHBI is a shared equity mortgage, which means that the Canadian government shares any losses and gains on the home. The FTHBI repayment is not based on the amount of your first time home buyer loan, but on the value of your home at the time of repayment. Therefore, if your home increases in value, you may pay back more than you borrowed. However, if your home’s value decreases, you pay back less than you borrowed at the government’s loss. 

Should You Consider The FTHBI? 

Before deciding to apply for the FTHBI, consult your mortgage broker and let them crunch the numbers for you. While this incentive may lower your downpayment and improve your chances of qualifying for a first time home buyer loan, it may cost you more in the long run. To find out more about the First Time Home Buyers Incentive in Edmonton, contact Dominion Lending Centres Mortgage Mentors today.

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