By Lanny McInnes
This week, the federal government announced the details of its First-Time Home Buyer Incentive, a program aimed at making buying a first home more achievable for Canadians. The incentive, first announced in March as part of the 2019 federal budget, will top up a first-time homebuyer’s down payment with an interest-free payment through a shared equity mortgage as a way to make monthly mortgage payments lower. The First-Time Home Buyer Incentive will be made available on September 2, 2019.
Through the First-Time Home Buyer Incentive, the government of Canada will offer five per cent of a first-time buyer’s down payment for the purchase of a resale home, or five or 10 per cent of a first-time buyer’s down payment for the purchase of a new construction.
The incentive is interest-free and does not require ongoing repayments. A first-time homebuyer would have to repay the loan after 25 years or when the home is sold, whichever comes first.
The incentive is being made available to first-time homebuyers with a maximum qualifying income of $120,000 per year, and at least one borrower on the mortgage must be a first-time homebuyer.
There is a special clause allowing eligibility for those who have ended a marriage or common-law relationship as well. But generally, the program is targeted at those who have never owned a home before. Total borrowing under the incentive is limited to four times the participants’ qualifying income.
The ultimate cost to homebuyers taking part in this incentive will rise and fall in direct proportion to the value of their first home.
The incentive has an equity-like payout, where the government would share in the upside and downside of the property value. The amount participants will pay back to the government of Canada will be five per cent of the home’s value at the time of sale (or end of the 25-year payback period). For a newly constructed home, this could be 10 per cent. While this incentive can be used to lower your monthly mortgage payments, the federal government would now have an equity stake in your home.
While the incentive will likely be helpful for some first-time home buyers in Manitoba, the homebuilding industry will continue to advocate nationally for greater changes to Canada’s mortgage rules that could potentially help tens of thousands of well-qualified buyers who should be entering the Canadian market.
Our industry will also continue to push for 30-year insured mortgages for first-time buyers and adjustments to the mortgage stress test to help make the dream of being a homeowner more achievable for Canadians.