The First-Time Home Buyer Incentive helps qualified first-time homebuyers reduce their monthly mortgage payments without adding to their financial burdens.
The First-Time Home Buyer Incentive is a shared-equity mortgage with the Government of Canada, which offers:
- 5% or 10% for a first-time buyer’s purchase of a newly constructed home
- 5% for a first-time buyer’s purchase of a resale (existing) home
- 5% for a first-time buyer’s purchase of a new or resale mobile/manufactured home
The shared equity component of the incentive means that the government shares in both the upside and downside of the property value, up to a maximum gain or loss equal to 8% per annum (not compounded) on the Incentive amount from the date of advance to the time of repayment.
By obtaining the Incentive, the borrower may not have to save as much of a down payment to be able to afford the payments associated with the mortgage. The effect of the larger down payment is a smaller mortgage, and, ultimately, lower monthly costs.
What is the First-Time Home Buyer Incentive?
The homebuyer will have to repay the Incentive based on the market value of the home at the time of repayment equal to the percentage (for example, 5% or 10%) of the original home value used to determine the Incentive, up to a maximum repayment amount equal to:
- (i) where the home’s value has appreciated, the Incentive plus a maximum gain of 8% per annum (not compounded) on the Incentive amount from the date of advance to the time of repayment; or
- (ii) where the home’s value has depreciated, the Incentive minus a maximum loss of 8% per annum (not compounded) on the Incentive amount from the date of advance to the time of repayment.
The homebuyer must repay the Incentive after 25 years, or when the property is sold, whichever comes first. The homebuyer can also repay the Incentive in full any time before, without a pre-payment penalty.
Who is Eligible?
These are a few criteria to determine your eligibility for the First-Time Home Buyer Incentive:
- your total annual qualifying income doesn’t exceed $120,000 ($150,000 if the home you are purchasing is in Toronto, Vancouver, or Victoria)
- your total borrowing, meaning the amount of your mortgage plus the amount provided by the program, is no more than 4 times your qualifying income (4.5 times if the home you are purchasing is in Toronto, Vancouver or Victoria)
- you or your partner are a first-time homebuyer
- you are a Canadian citizen, permanent resident or non-permanent resident authorized to work in Canada
- you meet the minimum down payment requirements with traditional funds (savings, withdrawal/collapse of a Registered Retirement Savings Plan (RRSP), or a non-repayable financial gift from a relative/immediate family member)
The Incentive is like a second mortgage on your home. Your first mortgage must be greater than 80% of the value of the property and is subject to a mortgage loan insurance premium. It also must be eligible through Canada Guaranty, CMHC or Sagen.
The insurance premium is based on the loan-to-value ratio of the first mortgage only. That is, the first mortgage amount divided by the purchase price. You don’t pay mortgage insurance on the incentive – it is included with the total down payment.
The type of home you plan to purchase plays a factor. The table indicates the type of home that qualifies for the incentive and how much of an incentive it may be eligible to receive.
New Construction: 5% or 10%
Existing Home: 5%
New and Existing Mobile/Manufactured Home: 5%
How to Apply for the First-Time Buyer Incentive
Once you’ve been pre-approved for a mortgage, found the home you’re looking for and determined you’re eligible to apply for the incentive, it’s time to apply. Simply fill out these 2 application forms to apply for the First-Time Home Buyer Incentive:
FTHBI – SEM Information Package (PDF)
SEM Attestation and Consent Form (PDF)
Once complete, give these to your lender. They will submit the application for you.
Give the final signed copy of the shared equity mortgage package to your solicitor to retain on your behalf.
When you receive your acceptance, call FNF Canada at 1-(855) 844-4535 to activate your incentive and provide the name of your lawyer/notary. (This must be at least 2 weeks prior to your closing date.)
How to Repay the Incentive
The Incentive must be paid in full – that is no partial payment – after 25 years or when the home is sold. There are a few ways where changes to the Incentive can trigger repayment:
- You go through a break up and you want to buy out the co-borrower. If this requires additional insured funds, you must pay back the Incentive in full.
- Porting your mortgage will trigger a repayment of the Incentive.
- A partial release of security is considered a sale and will trigger repayment of the Incentive.
Use these informational pieces to understand more about the incentive.
- Repayment Document (PDF): A step-by-step process along with key information.
- Appraisal Document (PDF): Appraisal checklist to be provided to the appraiser in the case of a voluntary repayment or at the 25-year mark.
- Operational Policy Manual (PDF)
- Questions & Answers (PDF)
If you’re thinking about buying for the first time and want to discuss strategies, pricing, timing, or anything else, simply complete my form on this page so I can get in touch right away. I’d be happy to answer any questions about the special incentives offered, or about the Toronto market in general.