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What is the CMHC First-Time Home Buyers Incentive?

Posted by Vanessa Freeman on September 11, 2019

cmhc-first-time-home

The Canadian government has rolled out a first-time home buyer inventive as part of our country's National Housing Strategy as of September 2, 2019. This incentive allows you to reduce your monthly mortgage payments without increasing your down payment if you qualify for a mortgage with between five percent and ten percent incentives available.

The CMHC First-Time Home Buyers Incentive program can help you purchase your first home. This program is designed to help first-time buyers without adding to their financial burdens.

Eligible first-time home buyers who have the minimum down payment for an insured mortgage can apply to finance a portion of their home purchase through a shared equity mortgage with the Government of Canada

With this incentive, Government of Canada provides:

  • 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

Am I eligible?

Key requirements of the program include: 

  • Annual household income cannot exceed $120,000
  • Can't have owned a home before*
  • Home must be used for their primary residence 
  • The mortgage loan can't be more than $480,000

*Do you meet the requirements as a first-time home buyer?

You are considered a first-time home buyer if you meet one of the following qualifications: 

  • you have never purchased a home before
  • you’ve recently experienced a breakdown of a marriage or common-law partnership
  • in the last 4 years, you did not occupy a home that you or you current spouse or common-law partner owned

How does it work?

Essentially, the government will pay for up to 10% of your new home.  This lowers the amount you need to borrow and reduces your monthly expenses.

For example: Dave would like to purchase her first home for $200,000 and has applied for 10% shared equity through the CMHC incentive. This lowers the amount Dave has to borrow for his new home by $20,000. As a result, Dave’s monthly mortgage payments would work out to be $288 less a month – saving him $2,736 per year!

 

When do I repay the loan?

The first-time home buyer will be required to repay the Incentive amount after 25 years or when the property is sold, whichever comes first. You can also repay the Incentive in full at any time, without a pre-payment penalty. 

Here’s where the shared equity part comes in – if the first time home buyer received 10% from the government, the home buyer would repay 10% of the homes fair market value to the government.

Home value increases  repayment increases

Home value decreases repayment decreases

 

Looking for more information?

Inquire with us today to get more information on this program, or take a peek at all of the details here.

 

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Topics: first time home buyer, mortgage & financial