Everything You Need to Know about the First-Time Home Buyer Incentive (FTHBI)

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Starting Septemer 2nd, 2019  It Will Officially Be Cheaper For You To Buy A House In Canada

The government is going to help First Time Home Buyers with their monthly mortgage payments.

It’s actually happening. Canada’s First-Time Home Buyer Incentive (FTHBI) came into effect on September 2nd, 2019 and it will make it a whole lot easier for young people to buy homes. Applications are officially being accepted as of today and will close on Nov. 1, 2019.

The program was introduced by the Liberal Government specifically to help young people buy their first homes without having to incur crippling monthly mortgage payments. The federal government will absorb five per cent of monthly mortgage payments on existing homes and 10 per cent on new builds. Therefore, you can decrease your monthly payments without having to increase your down payment.

This means that if you are buying a $500,000 home, this new incentive could save you $286 per month and more than $3,400 per year.

It also means that the government will have a stake in your home, and once your home sells you will pay them back their percentage of the home value. Which isn't necessarily a bad thing. It's just something to be aware of. The total funding available is $1.25 billion over the course of three years. If the property is sold at a higher value than it was bought, the government will be taking a cut. If the value has declined, the government will take a hit.

How to Qualify for the Incentive

  1. Applicants must not have owned a house in the last four years – exceptions will be made for those in a "breakdown of marriage or common-law partnership."
  2. Homebuyers' combined annual household income must be lower than $120,000 before taxes and deductions. Unfortunately this point makes the pool of qualifiers that much smaller within the Greater Toronto Area.
  3. The Value of the home must be less than 4x your annual income. Meaning the maximum property value under this program would be $560,000.
  4. Your Downpayment must be less than 20% in total. This means you would have to apply for CMHC Default Insurance.

There are obvious paybacks for the government. While they provide an interest-free loan, they also secure shared equity in your home as it goes through gains and losses. This means the amount paid back to the government will fluctuate based on how much your home increases or decreases in value.

The loan must also be paid back under three circumstances:

  • If you re-finance your home;
  • if you sell your home;
  • or at the end of 25 years.

FTHBI is more likely to benefit residents in less crowded markets, like smaller urban centres in Ontario, Quebec, the Prairies, or out east where you can still find a home below the price cap.

In our opinion if you qualify for the very strict criteria - you've got to apply and bring your monthly payments down. Eventually you can use your portion of the equity to do as you wish. Owing a smaller part of your home is better than not owning at all.

At ACE Funding we know can help you navigate through your First Time Home Purchase give us a call at 1-833-888-8223 for a free phone consultation.

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