The federal government has launched the First-Time Home Buyer Incentive plan, a national program that aims to make the first-time home buying affair a more affordable one for people across Canada. The program offers up to 10% of the home’s purchase price as the down payment to the eligible buyers, which lowers the mortgage carrying costs. The new immigrants might find this scheme helpful in buying their first home.
But before you jump into the plan, know all the things related to it to see if it is helpful for you because this Incentive is not for free. It is a loan that you will have to repay to the government with a possible premium.
Who is eligible for the Canadian First-Time Home Buyer Incentive plan?
According to this program, the first-time home buyers also include homeowners who have undergone a divorce or breakdown of common-law partnership and those who lived in a home that was owned by their spouse or common-law partner in the last four years. Apart from being a first-time home buyer, one must also meet the following requirements to be eligible for this government program.
– The qualifying household income should be less than $120,000
– Have at least the minimum down payment
– The borrowing amount should be less than four times of the qualifying income
How does FTHBI work?
Those who meet the eligibility criteria can apply for the Incentive. The Incentive is a shared equity mortgage that you share with the government of Canada. You can get an incentive equal to 5% of the purchase price in case of a re-sale home and 10% in the case of new homes. Buyers need not make any ongoing payments, and also need not pay any interest on the loan. However, they are required to repay the government’s share (5% or 10% of the market value of the house), either when they sell the home or after 25 years, whichever comes first.
What does the scheme mean in real terms?
The First-Time Home Buyers Incentive is a shared equity mortgage which means the buyer is supposed to repay the same percentage of the market value of the home, either 5% or 10% as the Incentive availed, whenever due. Assuming the housing prices see a drastic increase over the period of time as it has been happening all through the years, you will have to repay a highly appreciated amount to the government as their share. Further, if you spend on renovations during the period that will add to the base value of the house, in turn, making the government’s share value bigger.
Make the right decision for you: FTHBI or no FTHBI?
If your numbers are working out, and if you are willing to take the risk of paying a premium to what you get, then this program is just meant for you. However, thoroughly review all the aspects of the program, including legal aspects before applying for FTHBI.