What exactly is a first-time home buyer incentive, and what are the advantages of it? This incentive allows an individual to purchase a home and lower their monthly mortgage payment amounts. It’s a program that allows an individual to borrow either 5% or 10% of the purchase price of a property. The individual then has to pay back that same percentage of the property value within 25 years or when they decide to sell it.
How does the first-time home buyer incentive work?
Let’s say an individual receives a 5% incentive of a property’s purchase price. If the purchase price is $300,000, then the incentive is $15,000. If the value of the property increases to $400,000, then the payback would be $20,000. This amount is the same as 5% of the property’s current value.
As for another example, if an individual gets a 10% incentive of a property’s purchase price of $300,000, and the value of the property decreases to $250,000, then the value of the repayment will also be 10% of the current value.
Am I eligible for the first-time home buyer incentive?
An individual must be a first-time home buyer to be eligible for the incentive. The criteria pertains to an individual who has never bought a home in the past, as well as one who has not occupied a home that either they or their common-law partner or spouse owned in the last four years.
Additionally, one is eligible for the incentive if they have recently experienced a breakdown of either a common-law partnership or marriage. This last criterion is applicable even if an individual does not meet the other requirements.
What about the first-time home buyer incentive for certain locations?
According to the Government of Canada’s National Housing Strategy, first-time home buyers who are purchasing a home in Vancouver, Toronto, or Victoria census metropolitan areas are now eligible for an increased borrowing amount totaling 4.5 times their qualifying income, which is an increase from 4.0 times the amount. Additionally, these individuals may also be eligible for an increased qualifying annual income amount of $150,000. This is an increase from $120,000. The program can also lower the amount required for monthly mortgage payments.
The National Housing Strategy also has a page where an individual can access an eligibility and savings calculator. To use it, an individual must provide their home’s regional details, financial information regarding their annual income before taxes, down payment, and property type, as well as their mortgage information. The required mortgage information pertains to the amortization period, mortgage interest rate, and frequency of payments. The calculator is a useful online tool to help individuals get a better idea of what their financial situation would be like if they are eligible for and opt to use the first-time home buyer incentive.