First-time home buyer incentive

First-time home buyer incentive

It will take effect in September of this year and it was introduced in this year’s federal government’s budget. It is known as the “First-time home buyer incentive” and it serves the purpose of lowering mortgage costs for eligible Canadians. Essentially, this incentive program – of $1.25-billion – would allow prospective buyers to apply for an interest-free loan from CMHC (Canada Mortgage and Housing Corporation). CMHC would offer 5% towards an existing home or 10% towards a new build. The additional funds could lower the cost of a mortgage. 

There are, however, some requirements attached to this incentive that prospective homebuyers need to meet. You qualify for this incentive if: household income is under $120,000, purchasers have a minimum 5% down payment, and the amount received cannot exceed four times the participant’s annual income (equivalent to $480,000). The last aspect to this incentive is that the loan IS required to be repaid. 

On top of these requirements, the government has announced it will increase the amount first-time home buyers can withdraw from their RRSPs in order to finance their purchase – also known as the Home Buyer’s Plan – from $25,000 to $35,000 per individual. The amounts withdrawn as parte of this plan must be repaid over a 15-year period or included in the individual’s income if not repaid. The Home Buyer’s Plan will also include individuals who  may not be first-time home buyers but are going through a separation or divorce. 

However, whatever rules are in place for the mortgage stress test, which were introduced in January of 2018, will remain unchanged. 

To know more about this incentive, contact The Costa Group.