Mortgages Tools
First-time Homebuyers Incentive
A federal incentive geared towards qualified first-time homebuyers who are purchasing a new or existing home.
$55+ Billion in Funds
Over the next 10 Years
What is the First-Time Homebuyers Incentive FTHBI?
The First-Time Homebuyers Incentive (FTHBI) is a federal program offered through the Canadian Mortgage and Housing Corporation (CMHC). It allows qualified first-time homebuyers to reduce their mortgage payment with an interest-free incentive.
Take a look at the following example:
- Purchase Price $300,000
- Down Payment ($15,000)
- FTHBI ($15,000)
- Combined Down Payment ($30,000)
- Insurance Premium $11,400
Total Mortgage Amount: $281,400
Monthly Mortgage P&I Payment: $1,317.32
- Purchase Price $300,000
- Down Payment ($15,000)
- Insurance Premium $11,400
Total Mortgage Amount: $296,400
Monthly Mortgage P&I Payment: $1,387.54
Have Questions?
Ask A Mortgage Professional
A licensed Professional Mortgage Broker is the best resource when it comes to your home’s financing. Brokers work with multiple lenders so that they can show you the best option for your needs.
The program lowers your monthly mortgage payment by contributing to the overall downpayment. This exchange is referred to as “Shared Equity,” where CMHC will share in the upside or downside of the home’s market value at the time of repayment.
The provided portion CMHC contributes at the time of purchase, either 5% or 10% of the purchase price, represents the portion of equity CMHC is entitled too. This portion is due under these conditions:
- In the event of a sale of the home,
- Within 25 years from the date of purchase, or
- Pre-paid by the homeowner at anytime.
The amount is based on the type of home being purchased. If the property is an existing home, the incentive equals 5% of the purchase price. If the property is a newly constructed home, the incentive equals 10% of the purchase price.
- 5% Existing Homes
- 10% New Homes
The amount is based on the type of home being purchased. If the property is an existing home, the incentive equals 5% of the purchase price. If the property is a newly constructed home, the incentive equals 10% of the purchase price.
- 5% Existing Homes
- 10% New Homes
How Much is Owed? & How Does Repayment Work?
The amount owed is based on the homeowner’s incentive, 5% or 10%. The homeowner must repay that percentage based on the home’s market value at the time of repayment.
There is no obligation to pay back the original incentive amount if the home value has fallen below its original purchase price.
Take a look at each scenario:
Selling home after 5 years
5% Equity Share
(Existing Home)
- Original Price $400,000
- FTHBI $20,000
- Current Market Value $489,000
- Shared Equity Amount $24,000
Total Amount to Repay $24,000
Selling home after 5 years
10% Equity Share
(New Home)
- Original Price $350,000
- FTHBI $35,000
- Current Market Value $310,000
- Shared Equity Amount $31,000
Total Amount to Repay $31,000
How Do I Apply?
Talk to a Professional Mortgage Broker! He or She will work with you and determine if the CMHC First-Time Homebuyers Incentive is right for you. Not all lenders accept this program, but Brokers have the advantage in that we work with multiple lenders.
Whoever is on the mortgage will also be on the Shared Equity Agreement. However, unlike Provincial Programs, such as the Newfoundland’s First-Time Homebuyers Plan, only one person must meet the eligibility criteria.
The home can be refinanced without making immediate repayment of the incentive. The refinance must not exceed 80% of the total value of the home.
As time goes on, I believe more details will be released regarding refinancing options for those using the Shared Equity Incentive. It is difficult to say whether each lender will allow the refinancing of certain mortgage structures, as not all lenders will follow the same lending guidelines and policy.
There is no application or processing fee payable to CMHC.
The homebuyer is responsible for repayment and costs associated with valuing the home at the time of repayment. For example, if the homeowner were to repay the incentive but did not sell the home at that time, an appraisal would be required to determine the market value. The cost of the appraisal would be the homeowners’ responsibility.
The homebuyer is also responsible for certain third-party expenses, such as closing services, legal costs and other expenses associated with the purchase.
For the Incentive to apply, the first mortgage must be greater than 80% of the home’s value. In other words, the downpayment cannot exceed 19.99% of the purchase price.
The home must be the Homebuyers’ primary residence and eligible for CMHC Default Insurance, have year-round access, permanent heat source and located within Canada.
To qualify for the First-Time Homebuyers Incentive, the following must apply:
1. The Homebuyer’s total qualifying annual income shall be no more than $120,000. If there is more than one Homebuyer, the combined qualifying annual income shall be no more than $120,000.
2. Total borrowing is limited to no more than 4 times the qualifying income. The combined first insured mortgage and Incentive amount cannot exceed four times the total qualifying income. If there is more than one Homebuyer, the combined borrowing is limited to no more than 4 times the combined qualifying income.
3. The Homebuyer must be a Canadian citizen, permanent resident or non-permanent resident who is legally authorized to work in Canada.
4. At least one Homebuyer (if more than one on title) must be a first-time Homebuyer, as per the definition below:
- they have never purchased a home before; or
- in the last 4 years, they did not occupy a home that they or their current spouse or common- law partner owned; or
- they are experiencing a breakdown of a marriage or common-law partnership (in certain cases, even if/when the other first-time Homebuyer requirements are not met).
Yes,
The minimum downpayment required to purchase a home is 5%. Only traditional sources will be accepted, such as:
- Persoanl Savings
- RRSP, TFSA, Other Investments
- Non-Repayable Gift from an Immediate Family Member
Borrowed down payments such as, an Unsecured Personal Loan or Line of Credit are not acceptable sources of downpayment.
For the Incentive to apply, the first mortgage must be greater than 80% of the home’s value. In other words, the downpayment cannot exceed 19.99% of the purchase price.
The repayment is based on the home’s market value. If considering renovations, which will increase the homes’ value, it would be beneficial for the homeowner to repay the incentive before any significant improvements.
Yes,
The Shared Equity Mortgage is secured by registering against the home as a second mortgage.