Looking to buy your first home? You aren’t alone. Young people all over Canada are looking for a way to move on up from basement rentals. But, like many Millennials, you’re probably on a tight budget. Well, this is your lucky year! In its 2019 federal budget, the Government of Canada announced a way to help you: the First Time Home Buyer Incentive.
It launched September 2, 2019, and this National Housing Strategy program could mean the difference between renting and owning your home.
Let’s break down what you need to know about cashing in and moving into your dream home… or any home you don’t need to share with your siblings or college buddies.
What is the FTHBI?
The First Time Home Buyer’s Incentive is a program by which Canada’s Housing Agency, CMHC, will pay 5% of the purchase price of an existing home, or 10% of a new home.
Technically, the program offers a shared equity mortgage. Fancy term, simple idea: the Government of Canada gives you money to buy your first home, so it has a shared investment in the home. It also shares in the ups and downs of the property value.
Why is this exciting?!
Housing costs are soaring and that makes it hard for first time home buyers. The FTHBI aims to help you crack the housing market by giving you money to increase your down payment. This will lower your overall mortgage and make your mortgage payments more affordable.
With this program, you don’t pay interest on the incentive portion and you don’t have to make regular principal payments on it either. It is also repayable in full at anytime without a pre-payment penalty. All of these pieces can add up to you being able to afford your first home.
How does this benefit you?
There are two main benefits to this program:
1. It can make it possible for you to buy a more expensive home.
The real estate market is very expensive and competitive. This program can give you a leg up when competing for your dream home.
2. It can make the right home more affordable each month.
Owning a home can really add up. Between mortgage payments, property taxes, utilities and maintenance costs, to name a few, the costs can get pretty high. So every penny needs to count in your budget, and with the help of the incentive, you can reduce your mortgage payment leaving additional money to spend on other important parts of your life.
How much could you save in payments?
You can save a lot with the FTHBI! Say you want to buy a home with a $415,000 purchase price. With the FTHBI you could save about $115.57 each month on your mortgage payments. Sounds great, right?
Check out the Eligibility and Savings Calculator to see a break down of how this works. What you’ll find is a monthly savings. That’s money you can spend on groceries, gas, gifts, and saving for your future.
What’s the catch?
The incentive is not free. You have to repay it after 25 years, or when the property is sold, whichever comes first. When that happens, you owe the original government down-payment back, but you also owe the equivalent appreciation or depreciation in value.
You can think of it this way: the amount you get from CMHC is an investment in your home. You have to pay back any appreciation in the value of your home, but you generally save money throughout the term of your mortgage because your mortgage payments are lower. Learn more about repayment on the Government of Canada's website →
How do you qualify?
There are 4 main criteria to qualify:
- You must be considered a first-time home buyer.
- You must have at least a 5% down payment yourself.
- You must have a household income under $120,000.
- The mortgage and incentive amount can’t be more than 4 times your household income.
Still not sure if you qualify for the FTHBI? Check out the government’s Eligibility Calculator.
You’re in luck
The FTHBI program has a lot of bells and whistles. It also has quite a few hoops and hurdles in the application process. Check in with a PenFi advisor to learn more. We’ll help you understand the requirements, figure out the financials, and see if the FTHBI program is right for you. If you’re lucky, it could mean the difference between living in a house and owning a home you can afford to love.
Need more information?
No problem. Contact Us and we can have a member a Financial Advisor get back to you to answer your questions.