The First-Time Home Buyer Incentive allows first-time home buyers (FTHB) to reduce their monthly mortgage payment through a shared equity mortgage. A shared equity mortgage is where the government shares in the upside and downside of the property value. The incentive is an interest-free loan that does not require ongoing repayments. Buyers must repay it after 25 years or if the property is sold, and they can repay it at any time without any penalty.
If a FTHB meets the criteria, they can apply for a 5% shared equity mortgage on an existing home, new/re-sale mobile or manufactured home. Or a 10% shared equity mortgage on a new construction home. The program will be ready to receive incentive applications on September 2, 2019 (barring any unforeseen circumstances). The first closing will take effect on November 1, 2019.
ELIGIBILITY REQUIREMENTS FOR FIRST-TIME HOME BUYERS:
– Buyers must come up with a traditional down payment of at least 5% of the property value
– Buyers maximum qualifying income cannot be more than $120,000/year
– 4X the qualifying income is the maximum a buyer can borrow
Anita wants to buy a new home for $400,000.
Under the First-Time Home Buyer Incentive, Anita can apply to receive $40,000 in a shared equity mortgage (10% of the cost of a new home) through the program. This is on top of the minimum down payment of $20,000 (5% of the purchase price) from her savings.
As a result, it lowers the amount Anita needs to borrow and reduces the monthly expenses. Anita’s mortgage is now $228 less a month or $2,736 a year.
Years later, Anita has sold the home for $420,000. She repays the incentive as a percentage of the home’s current value. This would result in Anita repaying 10%, or $42,000 at the time of selling the house.