Buying your first house is a significant milestone in a person’s life. Unfortunately, it can be a somewhat intimidating application process that hedges on whether you get the property you want when you want it.
Looking for a mortgage is far less exciting than home shopping, but your realtor or broker may ask if you qualify for the First-time Home Buyer Incentive. If you haven’t heard of it before, you may be scratching your head, wondering what is it and how does the First-time Home Buyer Incentive work?
What is the First-time Home Buyer Incentive?
Venturing into property ownership has many perks, including the First-time Home Buyer Incentive. This federally sponsored plan helps with 5 or 10% of the home’s purchase price—depending on the type of home. It works in conjunction with the eligible applicant’s down payment.
The Canadian government’s goal is more affordable home ownership by lowering monthly mortgage payments. However, this shared equity instrument is not a free grant but a lending tool for first-time home buyers to purchase their residential property. Yes, that means it must be repaid and involves a mortgage lean on the property title.
Who is Eligible?
To be eligible, you must meet the following criteria:
- You are a Canadian citizen, a permanent resident, or a non-permanent resident authorized to work in Canada
- Your annual income must not exceed $120,000 per year
- Your total borrowing is no more than four times your yearly income
- You meet the downpayment requirements (from qualifying sources)
- The home is for your personal use year-round and does not include investment property
The First-time Home Buyer Incentive is for people who have never owned a home. Yet, other qualifying factors aren’t immediately obvious. For instance, if you have recently experienced a marriage or common-law relationship breakup or don’t inhabit a home you or your partner owned in the last four years.
If you are unsure whether you qualify, speak to an experienced mortgage broker who can guide you through the application process.
Once you have found a home and applied for a mortgage, you can apply to the federal government for the First-time Home Owner Incentive. First, fill out two specified forms before your lender submits them for you. Then, you need to provide your lawyer with the entire mortgage package, including the final signed copy of your applications.
Once approved, you need to call FNF Canada at 1-855-844-4535 to activate your incentive. Be sure to give them the name of your solicitor. Also, complete this step at least two weeks before your closing date.
As mentioned, you will need to repay the 5 or 10% government incentive at the following times:
- The sale of the property OR
- After twenty-five years OR
- Repayment is triggered
Triggering repayment can occur if you experience a breakup and attempting to buy the other party out requires additional insurance. In addition, porting your mortgage or a partial security release can also be considered a sale and trigger repayment.
Calculating repayment will depend on the property’s market value at the time of repayment. Partial payment is not available and is due in full under any of the above circumstances.
Get the First-time Home Buyer Incentive for Your Mortgage
Feel confident and get all the essential information you need from Axiom Mortgage Solutions. Their professional brokers will guide you through the process step-by-step to help you achieve your first mortgage with trusted advice. Axiom is Canada’s largest independent brokerage and helps clients get the best mortgage possible with friendly, approachable service.
Find out if the First-time Home Buyer Incentive is right for you! Contact us today online or call 1-800-517-8670 for more information.
*Information for this article was found on the Canada Government website under National Housing Strategy