THE much anticipated federal First Time Home Buyer Incentive has officially come into effect as of September 2nd this year.
The FTHBI is designed to alleviate mortgage costs for first-time home buyers, providing shared equity loans of 5% toward the down payment of a resale home, & 5% or 10% for newly-built homes.
As helpful as this sounds, unfortunately for buyers in Toronto, this won’t even help to afford a Garage, as these markets are outside the qualification criteria.
So what’s the big idea?
By boosting the size of buyers’ down payments, the FTHBI whittles down monthly mortgage costs, offering some relief on the costs of home ownership.
But rest assured First Home Buyers can now retrieve more from their RRSPs; up to 50K IF you’re eligible…
Well, unless you’re spending your money to cover the ever-increasing Rent prices, or if you never spend money on, well, LIFE. EVER.
I Digress; back to our topic of discussion:
Who qualifies for the FTHBI, how does it work, & who exactly does it benefit?
Here’s Zoocasa with a full breakdown of what to expect, or if you’re still with me see more info below.
Who can Qualify for the FTHBI?
In order to qualify for the FTHBI, home buyers must satisfy the following conditions:
- AT LEAST 1 PERSON in the household must be a first-time home buyer, ie. They have NOT OWNED A HOME, or dwelled in a home owned by their spouse, over the last 4 YEARS. (An exception is made for buyers who’ve had a breakdown of marriage or common-law relationship.).
- Buyers must have a MINIMUM 5% DOWN payment saved in order to qualify for an insured mortgage.
- Buyers’ combined household income CANNOT EXCEED $120K, This includes the income of any guarantors co-signing on the mortgage, as well as any rental income generated if part of the home is tenanted out.
- The buyers’ Mortgage-to-Income RATIO (MTI) cannot exceed 4x their income, including the portion that’s provided by the FTHBI. This means the MAXIMUM DOWN payment for a resale home CANNOT EXCEED 14.99%, and 9.99% for a new build.
*IF this somehow still applies to you, well done! Keep going, you’re part of the lucky few, Read-on.
How Does the FTHBI Work?
The funds provided via the FTHBI are registered as a 2nd mortgage, & don’t incur interest.
This 2nd mortgage must be paid back in full when the 1st insured mortgage matures at 25 years or when the home is sold, whichever comes first, though homeowners may pay it back as a lump sum early without penalty.
Because it is a shared equity mortgage, the amount to be paid back will fluctuate along with the value of the home over time: if the home’s assessed value rises, the loan repayment will increase by the same percent. However, the same will occur if the home has lost value by the time it is sold or the mortgage matures.
So, WHO will ACTUALLY Benefit from the FTHBI?
- Since its big reveal in the March 2019 budget, the FTHBI has been the subject of debate; some mortgage experts point out that borrowers taking out a traditional mortgage would actually qualify for a larger loan based on more generous MTI criteria, while others argue that home buyers could be on the hook for a much larger loan repayment if they live in a particularly hot market where real estate prices are rising.
- The largest points of contention are the FTHBI’s income and MTI caps; based on the criteria, a household earning the maximum income of $120,000 & making a 5% down payment would be limited to a resale home purchase price of $505,000 – an amount too low to have much traction in larger markets.
- However, new analysis from Zoocasa reveals that the FTHBI could be used in 19 of 25 major urban markets in Canada; a study of July 2019 average prices in 25 markets across the nation found home buyers with the maximum income of $120K & a 5% down payment could feasibly qualify for the FTHBI in 19 cities.
- These include markets in Eastern Canada, Quebec, & Prairies, as well as smaller urban centres in Ontario.
If you’d like any MORE INFO or HELP Applying please contact me on my website hicksonrealestate.ca or email