In our recent blog, the Ryan Boughen team shares some information on the First-Time Home Buyer Incentive Program. If you are looking to buy your first home, then you are interested in any opportunity that provides you a step up in making the biggest purchase you will ever make – a new home! Our team is made up of some of Regina’s best mortgage broker professionals. Passionate about helping people and working through the complex world of mortgage rules and regulations and breaking it all down into something YOU understand.
We get asked a lot about the First-Time Home Buyer Incentive Program (or FTHBI). This was recently introduced and launched by the federal government and we have some information on how it works in this blog AND if it is something that could benefit you.
Should I Use the First-Time Home Buyer Incentive Program to Buy a Home?
If you are a first-time home buyer or are making plans to become a homeowner in the future, you likely have questions about whether this program is right for you. Although you should consult with your mortgage broker to determine if you qualify, and if it’s a good fit for you, this information should assist you in making your decision.
- 5% down payment shared equity mortgage on resale homes
- 5% or 10% down payment shared equity mortgage on new homes
- One borrower must be a first-time home buyer as defined by the program (same as RRSP Home Buyers’ Plan criteria)
- Have your own minimum down payment of 5% from traditional sources
- Combined application annual income cannot exceed $120,000
- Maximum mortgage plus incentive amount cannot exceed 4 times your qualifying income (excluded insurance premium)
- Maximum purchase price limited to four times qualifying income plus your down payment
- Canadian citizen, permanent resident, or non-permanent resident authorized to work in Canada
- Combined down payment, including incentive, must be less than 20% of purchase price
Permitted Down Payment Sources:
- Saved – savings, chequing, TFSA, investments, etc.
- Gifted from immediate family
- Borrowed down payment (flex down) NOT eligible
Paying Back the FTHBI:
- Shared equity sharing in the +/- of the property when the money is paid back.
- No partial repayment allowed – only the full amount.
- Must be repaid at 25 years or when house sells.
- Does not have to be repaid if renewing with another lender or refinancing the mortgage.
- If voluntarily repaid, the homeowner is responsible for obtaining and paying for an appraisal. The Program Administrator reserves the right to get another appraisal at their expense. The homeowner also responsible for any legal fees that may be necessary for the mortgage discharge. There are no program fees charged at payout.
Other Details You Need To Know
- Your mortgage default insurance premiums will be reduced according to your loan.
- The incentive reduces the amount of money you are borrowing, thereby reducing your monthly mortgage payments.
- You will have higher legal and land title fees to close the purchase.
- In Saskatchewan, and perhaps in other provinces, expect your annual house insurance to cost more because the FTHBI is registered as a second loss payable (deemed riskier to insurers).
So, Is The Program Right For You?
Like any government program, there are pros and cons to taking advantage of the FTHBI. Provided you meet the strict qualification criteria, your monthly mortgage payments and cost of mortgage default (CMHC) insurance will be reduced. On the flip side, there are several drawbacks to using the program, including higher closing costs, higher cost of home insurance, and the requirement to pay back the loan based on the future value of your house, including any potential appraisal and legal fees at that time.
We take the view that if you can purchase your home without the use of this program, we would recommend that in most cases, but there may be certain instances where the benefits of the program could help you with your overall financial and home-owning goals. Review the program details with your mortgage broker prior to making any final decisions.
For all the program details, check out the program website at www.placetocallhome.ca
Or if you have any questions and would like the Ryan Boughen team to help you work through all the information out there, then contact us! We are more than happy to help determine what options are available to you and which ones make sense in your unique circumstances.