If you’re looking to be a homeowner in Toronto, the First Time Home Buyer’s Incentive (FTHBI) is a program that helps qualified first time home Buyers reduce their monthly mortgage payments without adding to their financial burdens. If you’ve been considering buying a home in Toronto, this program can help make homeownership more affordable.
We already know buying your first home is a very stressful process in itself, with so many requirements and financial savings needed. As house prices are continuing to rise in Toronto in 2021, it can be very challenging to purchase your first home and so the government has created the First Time Home Buyer Incentive Program to make it more affordable for first-time Buyers. It was originally launched in 2019 but was updated in May 2021 and these updates have increased the eligibility by increasing the maximum salary and home price. With these new changes made, it is hopeful that buying a home will be more attainable.
CMHC First Time Home Buyer Incentive
The government has several beneficial measures to help Canadians purchase their first homes. With the First Time Home Buyer Incentive, a shared equity mortgage, you are able to borrow 5% or 10% of the purchase price of a home. A shared equity mortgage means that the government will share in the up or downside of the property value. For example, let’s say you receive a 5% incentive of the home’s purchase price of $250,000 or $12,500. If your home value increases to $300,000 your payback would be 5% of the current value or $15,000. The government provides first-time Buyers with an interest-free down payment loan. The loan must be repaid either when the house is sold or within 25 years, whichever comes first.
The new changes to the First Time Home Buyers Incentive will help Buyers borrow more money to work with the rising home costs in Toronto. In our Real Estate obsessed city of Toronto, home sales broke another all-time record for the month of April despite COVID-19 lockdowns. These changes will allow Buyers to increase their price limit to approximately 700K rather than the previous 500K.
Am I Eligible for the Incentive?
To be eligible for the First Time Home Buyer Incentive you must be a Canadian citizen, permanent resident, or non-permanent resident legally authorized to work in Canada. The government has recently eased eligibility criteria for first-time home Buyers in Toronto, Vancouver, and Victoria.
The new eligibility requirements include:
- The maximum eligible household income has been raised to $150,000 (an increase from $120,000)
- Participants can borrow up to 4.5 times their household income, up from the current four times.
The type of home you plan to purchase plays a factor. You may be eligible for a loan of 5% for resale purchases, and 10% if the property is a new build. To be eligible for the incentive at least one person in your household has to be a first-time home Buyer, and the property cannot be used as an investment property. If you’re looking to save money on your first home, check out if you qualify for a tax-free first home savings account (FHSA).
What areas are included in the Incentive?
The government has extended the program in the Toronto, Vancouver, and Victoria Census Metropolitan Areas, which includes the major cities and their surrounding areas.
In Toronto, this includes the cities of:
- Brampton
- King
- Markham
- Mississauga
- Pickering
- Toronto
- Vaughan
In Vancouver, this includes the cities of:
- Burnaby
- Coquitlam
- Langley
- Maple Ridge
- New Westminser
- North Vancouver
- Pitt Meadows
- Port Moody
- Richmond
- Surrey
- Vancouver
- White Rock
In Victoria, this includes the cities of:
- Colwood
- Langford
- Victoria
Repaying the Incentive
This incentive must be paid in full on the due date. You must repay the full incentive 25 years or when the home is sold, whichever comes first. When the time comes to repay, a professional appraisal is required to determine the repayment amount.
Although the incentive is interest-free, you have to repay 5% of the market value at the time of sale. As Toronto Real Estate is a long-term investment, many properties increase in value over the years. Typically, the amount of your loan will rise along with the value of your property.
It is important to remember that the incentive is essentially a second mortgage. You don’t pay mortgage insurance on the incentive but there may be other fees required. This includes extra lawyer fees as they are closing 2 mortgages, and you will need to pay for a professional appraisal once repayment is due. Switching your first mortgage to a new lender or refinancing your first mortgage could trigger repayment before the initial due date.
As first-time home Buyers in Toronto, we know how stressful it can be. With over 14 years of experience, we have the knowledge and guidance to help make a stress-free transaction. Download our First Time Home Buyer Guide where we’ve put together everything you need to know so you feel confident and well-informed before buying your first home. Finding your first home might be the most important purchase you make. If you’re interested in starting your home buying journey this year, book a call with us to get started.
