REDUCE MONTHLY MORTGAGE PAYMENTS
Highlights
The Incentive enables first-time homebuyers to reduce their monthly
mortgage payment, without increasing the amount that they must save for a
down payment.
No on-going repayments are required, the Incentive is not interest
bearing, and the homeowner can repay the Incentive at any time without a
pre-payment penalty.
The shared equity mortgage means that the government shares in the upside
and downside of the property value.
ELIGIBILITY & REQUIREMENTS
First-Time Homebuyer Requirement
At least one homeowner must be a first-time
homebuyer, which is considered as the following:
- Have never purchased a home before
- 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 homebuyer or their spouse
IMPORTANT: It’s possible that you or your spouse or
common-law partner qualifies for the First-Time Home Buyer Incentive (if you
are in a married or common-law relationship) with the 4-year clause even if
you’ve owned a home.
Occupancy
Incentive is to help first-time homebuyers purchase their first home with
the intent to occupy. Investment properties are not eligible. Mortgage Loan
Insurance Requirement Mortgages must be eligible for mortgage loan insurance
through either Canada Guaranty, CMHC or Genworth. The first mortgage must be
greater than 80% of the value of the property and 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. The
Incentive amount is included with the total down payment.
Mortgage loan insurance premiums may be subject to provincial taxes.
Borrower Eligibility
Canadian citizens, permanent residents, and non-permanent residents who
are legally authorized to work in Canada
Income Requirement
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.
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.
Minimum Down Payment Requirement
For 1-2 unit properties, 5% of the first $500,000 of the lending value
and 10% of the remainder of the lending value, from traditional sources of
down payment. For 3-4 unit properties, the minimum down payment is 10% of
the lending value, from traditional sources of down payment.
Maximum Down Payment Requirement
For a 10% Incentive, the maximum down payment is 9.99%. For a 5%
Incentive, the maximum down payment is 14.99%.
Traditional Sources of Down Payment
A traditional down payment comes from sources such as savings,
withdrawal/collapse of a registered retirement savings plan (RRSP), funds
borrowed against proven assets, or a non-repayable financial gift from a
relative.
Non-Traditional Sources of Down Payment
A non-traditional down payment source, such as unsecured personal loans
or unsecured lines of credit used to satisfy minimum down payment
requirements is not eligible for the Program.
Loan-to-Value Requirement
The insured first mortgage loan-to-value must be above 80%.
Mortgage-to-Income Requirement
The combined mortgage and Incentive amount cannot exceed four times the
total qualifying income.
The amount for the mortgage loan insurance premium is excluded from this
calculation.
Debt Service Guidelines
Maximum threshold: GDS 39% / TDS 44%.
Only applied on first mortgage and subject to requirements by lenders and
mortgage loan insurers.
Security
The Incentive will be a second mortgage on the title of the property,
with no regular principal payments, is not interest bearing, and has a
maximum term of 25 years.
The Incentive will have an equity-like payout, where the Program will
share in the upside and downside of the property value upon repayment.
Repayment Requirement
Trigger for repayment: The first-time homebuyer will be required to repay
the Incentive amount after 25 years, or when the property is sold, whichever
is earlier. The homebuyer can also choose to repay the Incentive in full at
any time, without a pre-payment penalty. Refinancing of the first mortgage
will not trigger repayment.
Calculation of repayment amount: At time of repayment, if a homebuyer
receives a 5% (or 10%) Incentive, the homebuyer would repay 5% (or 10%) of
the home’s value to the government. Repayment will be based upon the home’s
fair market value.
FUNDING AVAILABLE
The Government of Canada has allocated $1.25 billion over three years
(starting in 2019) for this program.
More details about the First-Time Home Buyer Incentive will be released
later this year. The program will be ready to receive Incentive applications
on September 2, 2019. The first closing will take effect on November 1,
2019.
