What is the First Time Home Buyer Incentive?
Oct 2021 – 15 min read
If you’re a first-time homebuyer, you may qualify for the first-time home buyer incentive (FTHBI).
This is a shared-equity mortgage provided by the Canadian government.
The FTHBI could help you lower your monthly mortgage payments and make homeownership more affordable.
How to know if you’re eligible
To be considered a ‘first-time’ homebuyer, you must not have bought a home before, and must not have lived in a home that you or your current spouse/partner has owned in the last 4 years. You’re also considered a first-time buyer if you’re buying after the breakdown of a marriage or common-law partnership.
In addition to this, there’s other government criteria you’ll need to meet before you can apply:
- You have a combined annual income of less than $120,000
- You have a down payment of at least 5% of the property’s value
- Your mortgage is more than 80% of the property’s value
- Your mortgage is a maximum of 4 times your qualifying income
- The property you want to buy qualifies for mortgage insurance
- You’re a Canadian citizen, a permanent resident, or a non-permanent resident with permission to work in Canada
- You’re buying a home in CanadaOpens in a new window - Opens in a new window, and plan to live in it all year round
Remember – if you want to buy a home with a down payment of less than 20%, you’ll need CMHC mortgage loan insurance. This helps protect your mortgage lender in the event you can’t make your payments.
How do you pay back the FTHBI?
One key thing to remember is that when you repay your loan, you pay back the same percentage you borrowed, not the same amount.
For example, if you borrowed 5% of your property value through the FTHBI, you’ll need to pay back 5% of the property’s price when you sell it, regardless of whether that’s a higher or lower sum than you originally borrowed.
The home you bought for $500,000 is now worth $650,000. If you borrowed 10% of the purchase price when you bought your home, you borrowed $50,000 from the FTHBI. However, as the price of your home has since increased, you now need to repay 10% of the $650,000 figure, or $65,000. Similarly, if your home decreases in value and is now worth $450,000, you still need to pay back 10%, which would in this case be $5,000 less than the amount you borrowed.
The FTHBI is one of many other programs for first time home buyers, such as the RRSP home buyer plan and First Time Homebuyer Tax Credit.
If you’re unsure if you qualify for these or other programs, you may want to contact your advisor and a credit planning consultant (CPC) to find out more. A CPC can help with things like choosing the right type of mortgage, finding out how much you could afford, and providing information about mortgage insurance as you begin the journey towards buying your first home.
The information provided is based on current laws, regulations and other rules applicable to Canadian residents. It is accurate to the best of our knowledge as of the date of publication. Rules and their interpretation may change, affecting the accuracy of the information. The information provided is general in nature, and should not be relied upon as a substitute for advice in any specific situation. For specific situations, advice should be obtained from the appropriate legal, accounting, tax or other professional advisors.