So, you’re thinking about buying your first home in Canada, right? It’s pretty exciting, but also, let’s be real, kind of overwhelming. That’s where the First-Time Home Buyer Incentive (FTHBI)* comes into play. It’s like having a financial sidekick to make your entry into homeownership a little easier. Let’s dive into what this program is all about and how it could be a game-changer for you.
*As of March 21, 2024 the First Time Home Buyer Incentive will be discontinued.
Understanding the FTHBI: The Basics
The FTHBI (discontinued as of March 21, 2024) is a shared equity mortgage program from the Canadian government. Think of it as a co-investment in your home. Basically, the government chips in with a 5-10% contribution towards your home’s purchase price. This isn’t a cash gift, though – it’s more like buying a home together. The idea is to lower your monthly mortgage payments, making the financial side of homeownership a bit more comfortable.
How Does It Work?
- For Newly Built Homes: You can get 5-10% of the home’s purchase price.
- For Existing Homes: The contribution is 5%.
- For New or Existing Mobile/Manufactured Homes: Also, 5%.
The incentive amount depends on the type of home you’re buying and, of course, your eligibility.
Who’s Eligible?
- You need to be a first-time homebuyer.
- Your annual income should be $120,000 or less.
- The total borrowing is limited to four times your qualifying income.
Repaying the FTHBI: The Deal
Now, you don’t need to pay back the incentive immediately. You have three options:
- Repay it after 25 years.
- Repay it when you sell the house.
- Repay it when you refinance your home (take our equity, not renewing your mortgage)
The amount you repay will be based on your home’s fair market value at the time of repayment. So, if your home’s value goes up, so does the amount you owe – and vice versa.
Pros and Cons: Weighing It Up
- Pros:
- Reduced monthly mortgage payments.
- No interest on the incentive.
- May allow you to qualify for a higher mortgage
- Reduced Mortgage default insurance as it helps get you to the next higher bracket
- Cons:
- Shared equity means sharing the increase in your home’s value.
- The maximum borrowing limit might not suit everyone.
So, Is the FTHBI Right for You?
That’s the million-dollar question (or, more accurately, the few-hundred-thousand-dollar question). The FTHBI (discontinued as of March 21, 2024) can be a fantastic tool for many first-time buyers, but it’s not one-size-fits-all. It depends on your financial situation, the type of home you’re eyeing, and your future plans.
Closing Thoughts
Jumping into the housing market is a big step, and the FTHBI (discontinued as of March 21, 2024) can be a great way to ease the financial strain of your first purchase. If you’re trying to figure out whether this program is right for you, why not get in touch? We can chat about your options and help you make a decision that fits your dreams and your budget, feel free to contact me today.
*As of March 21, 2024 the First Time Home Buyer Incentive will be discontinued.