WHAT IS THIS NEW FIRST TIME HOME BUYER INCENTIVE (FTHBI)? In September, the government introduced the FTHBI, a program meant to help first time buyers with their down payment. Participation in this program can potentially decrease monthly mortgage payments and lower your mortgage default insurance premiums.
HOW IT WORKS You must be able to put down at least 5% from your own resources (savings, RRSP or gift from close relatives). The FTHBI will add 5% to your down payment if you are buying on the resale market, or 10% if you are buying from a builder.
Funds provided by FTHBI are registered as a second mortgage with no interest or required payments but it has to be paid when the mortgage matures in 25 years or when the property is sold, whichever comes first.
DO YOU QUALIFY? Your total family income cannot exceed $120,000 and the maximum purchase price of your home with this program is four times the income that you used to qualify for this program.
POTENTIAL DOWNSIDES The FTHBI is an equity sharing program which means repayment will not just be the initial 5% contribution but rather 5% of the current value of the property.
First time homebuyers who are planning to sell the property within the first 3-5 years will likely save money but if you are planning to live in your house for a long period of time, you will have to share the equity growth with the government, paying back much more than what you got through FTHBI.
The four time income rule shrinks your buying power when compared to the regular CMHC program where borrowers may qualify for a larger mortgage.
There are many tiny details that you have to discuss with your broker. For example, divorced people who used to own a house before they split can also qualify for this program. The FTHBI could be beneficial but due to complexity, it is recommended that you review all possible scenarios with your broker to determine if this program fits your income and plans. – Text by Tamara Tkachuk, www.bayviewfs.com