• What is the First-Time Home Buyer Incentive?

The First-Time Home Buyer Incentive (FTHBI) is a program offered by the Government of Canada to help first-time home buyers with their down payment or mortgage payments. The program was launched in September 2019 and is administered by the Canada Mortgage and Housing Corporation (CMHC).

Qualified first-time homebuyers can benefit from the First-Time Home Buyer Incentive, which allows them to lower their monthly mortgage payments without increasing their financial obligations.

The incentive is in the form of a shared-equity mortgage with the Canadian government, providing

• 5% or 10% for a first-time buyer's purchase of a newly constructed home

• 5% for a first-time buyer's purchase of a resale (existing) home

• 5% for a first-time buyer's purchase of a new or resale mobile/manufactured home

As part of the shared-equity agreement, the government will share in the property value's upsides and downsides, capped at a maximum gain or loss of 8% per annum (not compounded) on the incentive amount from the advance date to the repayment time.

• Am I eligible for the First-Time Home Buyer Incentive?

Just as the name implies, this incentive is for first-time homebuyers. Here are some factors that determine whether you are eligible for the First-Time Home Buyer Incentive:

• Your annual qualifying income should not exceed $120,000 (or $150,000 if you are buying a home in Toronto, Vancouver, or Victoria).

• Your borrowing amount should not be more than 4 times your qualifying income (or 4.5 times if you are purchasing a home in Toronto, Vancouver, or Victoria).

• You, or your partner, must be a first-time homebuyer.

• You must satisfy the minimum down payment requirements using traditional funds, such as savings, withdrawal/collapse of a Registered Retirement Savings Plan (RRSP), or a non-repayable financial gift from a relative/immediate family member.

• How do I repay the incentive?

The First-Time Home Buyer Incentive operates akin to a second mortgage on your property. To qualify, your initial mortgage must exceed 80% of the property's value and be acceptable by Canada Guaranty, CMHC, or Sagen.

The mortgage insurance premium is reliant solely on the loan-to-value ratio of your first mortgage, which is the amount of your primary mortgage divided by the purchase price. You are not obligated to pay mortgage insurance on the incentive, as it is included in your overall down payment.

The loan is interest-free, and the homebuyer must repay the Incentive after 25 years, or when the property is sold, whichever comes first. The homebuyer can also repay the Incentive in full any time before, without a pre-payment penalty.

Here are some instances where modifications to the Incentive could prompt repayment:

• You undergo a breakup and intend to buy out the co-borrower. If additional insured funds are necessary, you will need to repay the Incentive in its entirety.

• Porting your mortgage will result in the repayment of the Incentive.

• Repayment of the Incentive will be necessary if there is a partial release of security, which is viewed as a sale.