What is the First Time Homebuyer Incentive?

The first-time homebuyer incentive program is a shared-equity mortgage with the Canadian government that helps qualified first-time buyers reduce their monthly mortgage payments to better afford a home!

The Incentive: This program allows you to obtain an incentive from the government to assist with your down payment, thereby lowering your overall mortgage amount and, in turn, your monthly mortgage costs.

• 5% or 10% for a first-time buyer’s purchase of a newly constructed home
• 5% for a first-time buyer’s purchase of a resale (existing) home
• 5% for a first-time buyer’s purchase of a new or resale mobile/manufactured home

Qualifying for the Incentive: This program is designed to assist first-time homebuyers, therefore you must:

• Have never purchased a home before
• Have not occupied a home that you, your current spouse or common-law partner owned in the last 4 years
• Have recently experienced a breakdown of marriage or common-law partnership

If you meet the above criteria, further qualifications are based on your income and status as follows:

• Your total qualifying income is no more than $120,000 ($150,000 for homes in Toronto, Vancouver, or Victoria)
• Your total borrowing is less than four times your qualifying income (four and a half times your income if you’re purchasing in Toronto, Vancouver or Victoria)
• You are a Canadian citizen, permanent resident or non-permanent resident authorized to work in Canada
• You meet the minimum down payment requirements

Here’s an example.

Cali wants to buy a new home for $400,000.
Under the First-Time Home Buyer Incentive, Cali can apply to receive $40,000 in a shared equity mortgage (10% of the cost of a new home) from the Government of Canada. This lowers the amount she needs to borrow and reduces her monthly expenses.
As a result, Cali’s mortgage is $228 less a month or $2,736 a year.

Additional Costs: With the incentive, there are a few additional costs to be aware of such as additional legal fees (your lawyer is closing two mortgages, the one on your behalf and that on the Government’s behalf), appraisal fees to determine the repayment value of your home when it comes due, plus other potential fees such as refinancing or switching costs if you decide to move or update your mortgage.

Repayment Process: When it comes to repayment of the incentive, the homebuyer is required to pay back after 25 years or when the property is sold, whichever comes first. They are also able to repay anytime prior to this without penalty. The repayment is based on fair market value at the time of repayment and you would pay back what you received. For instance, if you received a 5% incentive, you would repay 5% of the current home value at the time of repayment.

Keep in mind, if you choose to port your mortgage or go through a separation during the term and want to buy out your co-borrower, you will have to repay the incentive sooner.

Updates to the First-Time Home Buyer Incentive can benefit more homeowners

The Government of Canada will limit its share in the appreciation of a home! Now, homeowners will pay back up to a maximum gain of 8% per annum (not compounded) on the Incentive amount from the date of advance to the time of repayment.

This means that participants may be able to keep more when their homes increase in value

The Government of Canada will also limit its share in the depreciation of a home at the time of repayment. This is up to a maximum loss of 8% per annum (not compounded) on the Incentive amount from the date of advance to the time of repayment.

In the case of appreciation, the above Incentive repayment calculation is retroactive to the implementation date of the First-Time Home Buyer Incentive (September 2, 2019). In the case of depreciation, the above Incentive repayment calculation applies to all borrowers who have signed a shared equity mortgage agreement on or after June 1, 2022.

Already repaid the First-Time Home Buyer Incentive?

CMHC has contracted FNF Canada to administer reimbursements to eligible borrowers. If you are eligible, you will be contacted by FNF Canada and asked to verify your information in order to proceed with your reimbursement.