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First-Time Home Buyer Incentive

First-Time Home Buyer Incentive

UPDATE: The Federal First-Time Homebuyer Incentive was discontinued on March 31, 2024.

What was the First-Time Homebuyer Incentive?

The Government of Canada offered a shared equity mortgage (loan) as a first-time home buyer incentive.  There were no ongoing payments or interest paid on the incentive, but the loan was required to be paid back within 25 years or when the property was sold, whichever occured first.

How did the Incentive work?

The incentives varied depending on whether it was a purchase of a preowned house, or a presale/new construction house. The following were the benefits of the first-time home buyer incentive:

    • A first-time buyer could receive as an incentive, 5% on the purchase of a preowned house, or

    • A first-time buyer could receive as an incentive, 5% or 10% on the purchase of a new house.

Since this was a shared equity mortgage, the incentive sum to be repaid was determined by the property’s market value at the time of repayment.  More would have needed to be repaid if the value of the property had risen at the time of repayment, and less money would have needed to be repaid if the property value had decreased at the time of repayment.

For instance, if you paid $435,000 for a house, but it was worth $500,000 when sold, the 5 or 10% incentive repayment would have been based on the $500,000.

The Government of Canada limited its share in the appreciation of the property:  homeowners would have paid back up to a maximum gain of 8% per annum (not compounded) on the incentive amount, from the date of advance to the time of repayment (retroactive to September 2, 2019).

The Government of Canada also limited its share in the depreciation of a property at the time of repayment, up to a maximum loss of 8% per annum (not compounded) on the incentive amount from the date of advance to the time of repayment (on or after June 1, 2022).

There was no pre-payment penalty, no ongoing repayment requirement, and no interest charged on the incentive.

Who was Eligible for the Incentive?

The following requirements needed be met to have been eligible for the incentive:

    • Your maximum qualified income could not exceed $120,000 (except if you lived in Toronto, Vancouver or Victoria, in which case the maximum qualifying income was $150,000).

    • The home must have been your principal residence.

    • You or your partner must have been a first time homebuyer.

    • To qualify, you were required to adhere to the minimum 5% down payment requirements (and 10% for the lending value above $500,000), with traditional funds as the downpayment source.

    • The maximum amount you could borrow overall was four times your eligible income (except if you live in Toronto, Vancouver or Victoria, in which case the maximum amount you can borrow overall was 4.5 times your qualifying income).

    • You were required to be a Canadian citizen, a permanent resident, or have legal authorization to work in Canada if you were a non-permanent resident.

    • Your first mortgage was required to be greater than 80% of the value of the property and subject to a mortgage loan insurance premium (e.g. CMHC).

You were required to be buying the property to live in it to qualify for the incentive; it was not made available to people who were buying for investment purposes.

Who Qualified as a First-Time Home Buyer?

If you fit one of the following criteria, you qualified as a first-time homebuyer:

    • You’ve never bought a house before.

    • In the last four years, you did not live in a house that you, your spouse at the time, or your common-law partner owned.

    • You experienced the dissolution of your marriage or common-law partnership (even if you don’t meet the other prerequisites for first-time homebuyers).

Please Note: If you are married or in a common-law relationship, you could have  been eligible for the First-Time Home Buyer Incentive with the 4-year clause even if you have previously owned a property.

While the federal First-Time Homebuyer Incentive was discontinued  March 31, 2024, there may be other Government programs that can help. To begin the home-buying process, call The Auxilium Team at 250-590-6520 (toll-free 1-855-590-6520) for a free consultation. During regular business hours, you can also stop by #16-Unit 211-2840 Peatt Road to see us. We can also schedule an appointment with you during or after regular office hours.

This post reflects the best available information at the time of writing/last update. In order to ensure that you have the most up-to-date information, contact us to confirm the details for your specific situation.

 

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