The Government of Canada is offering a shared equity mortgage. This allows eligible first-time home buyers, with the minimum down payment for an insured mortgage, to apply to finance a portion of their home purchase. Therefore, first-time home buyers can reduce their monthly mortgage carrying costs.

Specifics of the Loan

  • The Government of Canada has a shared investment in the home. They share in both the upside and downside of the property value.
  • The loan is not interest-bearing. There are no regular principal payments. No on-going repayments are required. It does not require the repayment with interest.
  • The loan is required to be repaid at the end of the 25-year term or at the time of sale, whichever is earlier. In addition, the homeowner can repay the Incentive at any time without a prepayment penalty.
  • The homeowner will, however, be responsible to pay certain third-party expenses, such as closing services and legal costs.

First-Time Home Buyers Incentive Amount

An Incentive amount of 5 percent is available for the purchase of an existing home.

An Incentive amount of 5 percent or 10 percent is available to qualified buyers for the purchase of a newly constructed home. The larger Incentive is to encourage new builds as a result.

Eligibility & Requirements for First-Time Home Buyers

To clarify, at least one homeowner must be a first-time home buyer, which is considered as the following:

  • Canadian citizens, permanent residents, and non-permanent residents who are legally authorized to work in Canada
  • At least one borrower must be a first-time home buyer
  • Total qualifying income must be $120,000 per year or less. Income is subject to qualifying income requirements set out by lenders and mortgage loan insurers.
  • The first mortgage + Incentive amount cannot exceed 4 times the total qualified annual income.
  • Have gone through a breakdown of marriage or common-law partnership. Even if the other first-time home buyer requirements are not met.
  • In the last 4 years did not occupy a home that was occupied by the home buyer or their spouse

IMPORTANT: It’s possible that you or your spouse or common-law partner qualifies for the First-Time Home Buyer Incentive. Most importantly, it has the 4-year clause even if you’ve owned a home.

First-Time Home Buyers Occupancy Incentive

The Incentive is to help first-time home buyers purchase their first home with the intent to occupy it themselves. As a result, investment properties are not eligible.

Mortgage Loan Insurance Requirement

Mortgages must be eligible for mortgage loan insurance through either Canada Guaranty, CMHC or Genworth. In addition, the first mortgage must be greater than 80% of the value of the property. Also, it is subject to a mortgage loan insurance premium. The premium is based on the loan-to-value ratio of the first mortgage only. That is, the first mortgage amount divided by the purchase price. Subsequently, the Incentive amount is included with the total down payment. Mortgage loan insurance premiums may be subject to provincial taxes.

Most noteworthy, is that the mortgage application process is unchanged. The only difference is that the signed disclosure statement from the borrower must be obtained up-front and retained on file.

Property Types Eligible residential properties include:

  • new construction
  • re-sale home
  • new and re-sale mobile homes

Residential properties can include 1 to 4 units. Types of residential properties include:

  • single family homes
  • semi-detached homes
  • duplex
  • triplex
  • fourplex
  • town houses
  • condominium units

IMPORTANT: The property must be located in Canada and must be suitable and available for full-time, year-round occupancy.

Non-Traditional Sources of Down Payment

In conclusion, a non-traditional down payment source, such as unsecured personal loans or unsecured lines of credit used to satisfy minimum down payment requirements are not eligible for the Program.

FUNDING AVAILABLE-The Government of Canada has allocated $1.25 billion over three years (starting in 2019) for this program.  To sum up, the program will be ready to receive Incentive applications on September 2, 2019. The first closing will take effect on November 1, 2019.

For more information

https://www.placetocallhome.ca/fthbi