The new First Time Home Buyer’s Incentive opened up for applications on September 2nd. This is an initiative that was announced by the Liberal government when they released their budget earlier in the year and is aimed at easing affordability for first time homebuyers.
The premise of the program is an interest-free shared-equity loan that is provided by the government to assist with first time buyers’ down payment.
Interested applicants must put down at least 5% of the home’s value with their own money and the government will provide an additional 5% down payment, if purchasing an existing home, or 10% if it’s a new build. The loan is registered as a second mortgage on the title of the home and the applicant’s do not need to make any payments on it. The loan must be repaid after 25 years, or when the home is sold, with the government sharing in any gains or losses of the home’s value. Ie, whatever the home is sold for, the applicant must pay 5%, or 10%, respectively, of the sale price.
In order to be eligible, there are certain restrictions:
- The mortgage must be default insured (by CMHC, Genworth, or Canada Guaranty)
- You must be a first time buyer with a household income under $120,000
- You must have a minimum of 5% down payment
- The mortgage amount plus incentive cannot be more than four times the participants’ annual household income, essentially capping the purchase price under this program at $505,263 with a 5% down payment
It doesn’t take a rocket scientist to see that the above criteria will do little to assist buyers in the Vancouver and Lower Mainland regions. However, as of September 12th, the Liberals announced some tweaks that they would make to the program, should they get re-elected, in order to provide further assistance to first time buyers in these areas.
In what many are labeling as nothing but an election ploy, here is what would change for buyers in the Greater Vancouver, Victoria, and Toronto regions:
- The maximum household income for participants will increase to $150,000
- The mortgage amount plus incentive could total up to five times the household income, increasing the maximum purchase price to $789,473 with the minimum down payment
While this may be viewed as an election ploy, the math on it seems to actually help first time buyers in these regions allowing them to qualify for approximately $40,000 more home than if they were to not participate in the program, while also reducing their monthly mortgage payments by approximately $215 per month.
Interested buyers may only currently apply under the original parameters as laid out above and closings must be on or after November 1st. Should the Liberals be re-elected next month, then the new updated criteria will be launched for first time buyers in the respective regions.
Further information can be found at www.placetocallhome.ca. Of course I am available for any and all questions as well.
Jeff Ingram – 604-763-4647 – Jeff@IngramMortgageTeam.com