Coming into effect in early September, the Federal Government’s First-Time Home Buyer Incentive aims to make it easier for young people to buy their first home by lowering new buyers’ monthly mortgage payments without increasing their downpayment. With house prices rising across the country, this program will ensure that affordability is maintained especially for those just entering the market. Here’s how it works:

The First-Time Home Buyer Incentive is considered a Share Equity Mortgage where the Government of Canada will have shared interest in the borrower’s property value. Through this program, borrowers will receive the following in the form of an interest free loan towards their down payment:

• 5% of the purchase price of a resale property
• 5% or 10% for the purchase of a new construction home

To be eligible for this program, the borrower must be a Canadian citizen, Permanent Resident, or Non-Permanent Resident who is legally authorized to work in Canada. At least one of the borrowers must be a First-Time Home Buyer based on the qualifying criteria and the property must be owner occupied and located in Canada. Borrowers are still responsible to contribute the minimum required down payment from tradition sources and mortgage insurance premiums will be calculated based on the purchase price less the borrower’s own down payment and the First Time Home Buyer Incentive amounts. 

The loan has no monthly payment and repayment will be based on fair market value to be determined at the time of repayment. Repayment will be necessary when either the property is sold or at the end of the 25 year term, whichever happens first but voluntary repayment of the full incentive can be made at any time without penalty.

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