Mortgage Blog

First-Time Home Buyers Incentive

March 2, 2022 | Posted by: Roar Solutions

The First-Time Home Buyer Incentive helps people across Canada purchase their first home. The program offers 5 or 10% of the home’s purchase price to put toward a down payment. This addition to your down payment lowers your mortgage carrying costs, making homeownership more affordable.

WHAT IS THE INCENTIVE?

Get more details on the First-Time Home Buyers Incentive (PDF) The First-Time Home Buyer Incentive makes it easier for you to buy a home and lower your monthly mortgage payments. This program is a shared equity mortgage. This means that the government shares in the upside and downside of the property value. It allows you to borrow 5 or 10% of the purchase price of a home. You pay back the same percentage of the value of your home when you sell it or within a 25-year window.

It works like this:

• You receive a 5% incentive of the home’s purchase price of $200,000, or $10,000. 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 $200,000, or $20,000 and your home value decreases to $150,000, your repayment value will be 10% of the current value or $15,000.
• Just as the name implies, this incentive is for first-time homebuyers. You’re considered a first-time homebuyer if:
• you have never purchased a home before
• you did not occupy a home that you or your current spouse or common-law partner owned in the last 4 years (the 4-year period begins on January 1 of the fourth year before the Incentive is funded and ends 31 days before the date the Incentive is funded)
• you have recently experienced the breakdown of a marriage or common-law partnership (even if you don’t meet the other first-time home buyer requirements)

AM I ELIGIBLE FOR THE INCENTIVE?

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 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.

Residential properties can have 1 to 4 units and include:

• single family homes
• semi-detached homes
• duplex
• triplex
• fourplex
• town houses
• condominium units
• mobile homes

The bottom line: Your property must be located in Canada and must be suitable and available for full-time, year-round occupancy. Your home is for you to live in and can’t be used as an investment property.

Other details you need to know The Incentive may be associated with additional costs:

• Additional legal fees: Your lawyer is closing 2 mortgages so you may be charged higher fees.

• Appraisal fees: To repay your incentive, you may need to have an appraisal done to determine the fair market value of your home.
• Other fees: Additional fees may be incurred throughout the life cycle of the incentive, like switching your first mortgage to a new lender or refinancing your first mortgage.
• Property Insurance premiums: Additional costs may be incurred to account for an additional mortgage registered on the property. Talk to your insurance broker or insurance provider to find out more details.

Repayment Details

• 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 breakup 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) 

Borrowers should discuss with their lender if repayment of the incentive is required under certain refinancing situations.

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