First-Time Home Buyer Credit, answers to your questions

Tuesday, September 10, 2019 Written by Emmanuelle in General

The government is trying to make access to ownership more affordable by introducing the First-Time Home Buyer Incentive (FTHBI), which can reduce the monthly payments required when buying a home. The FTHBI was officially launched on Sept. 2.

How does the plan works?

The details

Under the FTHBI, the government will help you buy a home by providing up to 10 per cent of the purchase price. Basically, the amount provided is a mortgage on the property with no interest or ongoing payments required. 5 per cent for a resale home, and between 5 to 10 % for newly constructed home.You’ll have to make repayment under the program when you sell the home, or after 25 years, whichever comes first – but you can choose to make repayment sooner.

This funding is called a “shared equity mortgage” so that the government will participate in any appreciation in value of your home, or declines in value.

Let us take an example: you buy a home for, say, $450,000 and you receive a 10-per-cent incentive ($45,000) from the government. If you resell the home for $600,000, you’ll have to repay 10 per cent of your selling price to the government – or $60,000 in this case.

To qualify, as a first-time buyer,
1) You’ve never purchased a home before;
2) you’ve gone through a breakdown of a marriage or common-law partnership;
3) in the past four years, you haven’t occupied a home that you or your current spouse or common-law partner owned. So, you might qualify for the incentive if you’re separated or divorced and don’t otherwise meet the first-time home buyer criteria.

Also your qualifying income must be $120,000 annually or less, your total borrowing (your mortgage plus the incentive) is limited to four times your qualifying income, your minimum down payment must be 5 per cent (on the first $500,000 of property value; 10 per cent on the value above $500,000), and your total down payment must be under 20 per cent (so that the mortgage will be insured through either Canada Guaranty Mortgage Insurance Corp., Canada Mortgage and Housing Corp. or Genworth Canada).

My opinion is that in many cases it can be very helpful to enter in ownership and then be able to build up equity if you cannot expect help from parents and family. Still in the GTA at that price range options are limited, but possible depending on what you are looking for.

Finally keep in mind, too, that if you make renovations that increase the value of your property, you’ll be handing a portion of that increased value to the government later when you repay the FTHBI.

Source : Globe and Mail/sept 2019

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