First-Time Home Buyer Incentive (FTHBI)

Jan 8

Written By Georgia .

Shared Equity Mortgage: The government contributes 5% or 10% of the purchase price of the home as a down payment. This amount is a shared equity loan, meaning the government will own a percentage of the home.
- 5%: For existing homes (resale homes).
- 10%: For newly constructed homes.
The loan reduces your monthly mortgage payments because you don’t have to borrow as much from your lender. This can make homeownership more affordable in the short term.
Repayment:
- The FTHBI is a shared equity loan, meaning you repay the government when you sell the home or after 25 years, whichever comes first.
- The government’s share of the home’s value is proportional to the initial contribution (i.e., if the government contributed 10%, it will take 10% of the sale price when you sell the home).
- If the home increases in value, the repayment amount increases. If the home decreases in value, the repayment amount decreases.

To qualify for the First-Time Home Buyer Incentive, applicants must meet specific eligibility criteria:

First-time Homebuyers:
- You must not have owned a home in the last four years.
- You are considered a first-time buyer if you have never purchased a home before or if you’ve experienced a life event that significantly impacts your ability to buy a home (e.g., divorce or separation).
Income Limits:
- The household income must be under $120,000 per year. This includes all individuals in the household who will be contributing to the mortgage.
Home Price Limits:
- The home price must be less than $500,000 to qualify. This means that the maximum price of the home that can be purchased with FTHBI assistance is capped at this amount.
- This price limit applies to the purchase price of the home, which includes the cost of the property and any other applicable fees or charges.
Minimum Down Payment:
- You must be able to make the minimum down payment of at least 5% on the home using your own funds or other eligible sources of assistance (such as your RRSP under the Home Buyers' Plan).

The 5% or 10% shared equity loan will reduce the mortgage amount you need to borrow.
For example:
- If you're purchasing a $400,000 home and you qualify for the 5% incentive, the government will provide $20,000 to be added to your down payment. If you provide your own 5% down payment (which would be $20,000), your total down payment becomes $40,000. This reduces your mortgage by that amount, making your monthly mortgage payments lower.
Since the loan is interest-free, it helps reduce the cost of the mortgage in the short term. However, when you repay the loan, the repayment amount is based on the home’s value at the time of repayment.

You must repay the loan either:
- When the property is sold.
- After 25 years, whichever happens first.
If the home appreciates in value, you will owe a larger amount to the government. If the home’s value declines, you will owe a smaller amount.
There is no interest charged on the loan, but the amount you owe to the government is based on the percentage of the home’s value. This means if the market value increases, the repayment amount increases.
If you sell the house before 25 years, you pay the government’s share of the sale price.
There is no requirement for monthly payments on the loan — it’s only repaid when you sell the house or after 25 years.

Pros:

Lower monthly mortgage payments: The government’s contribution means that you borrow less money from your bank, lowering your monthly mortgage payments.
No interest: Since it’s a shared equity loan, the government does not charge interest on the loan amount.
Down payment assistance: It gives you a chance to secure a larger down payment, which may help you qualify for a mortgage.

Cons:

Repayment based on the home’s value: If the market appreciates, the amount you owe to the government will increase.
Shared equity: You are sharing part of your home’s equity with the government, which means you may owe more than your initial down payment amount if the property appreciates.
Limits on home price: The program limits the price of the home, so you may not be able to use it in high-priced markets like Vancouver or Toronto unless you find a smaller or more affordable property.
Repayment obligations: Even though the loan is interest-free, it still has to be repaid within 25 years or when the house is sold.

Property Type: The FTHBI applies to homes that are meant for personal use, including single-family homes, semi-detached homes, townhouses, and new constructions.
Geographic Restrictions: The home must be located in Canada. However, the program is available in all provinces and territories.
No Monthly Payments: There are no monthly payments to the government, but the homebuyer is responsible for repaying the loan when the house is sold or after 25 years.

Step 1: Check eligibility criteria on the official website of the Canada Mortgage and Housing Corporation (CMHC), which administers the program.
Step 2: Apply through a participating lender, such as a bank or mortgage broker. The lender will help you assess your eligibility, and they will initiate the paperwork for the shared equity mortgage.
Step 3: After receiving approval, you can proceed with the purchase of your home with the government’s contribution.

Home Buyers' Plan (HBP)