With the recent federal election, there has been a great deal of discussion around the Liberal Government’s incentive for First-time Home Buyers which was effective September 2, 2019. The Government of Canada has allocated $1.25 billion over the next three years for this program. The incentive is designed to help first-time homebuyers find an affordable home. Finding an affordable home has proven to be a challenge for first-time home buyers and especially younger Canadians. The lack of inventory has affected the availability of affordable housing options. This has made the cost of housing as a percentage of gross income too high.
It would be premature to determine the long term impact of the Incentive on the Ottawa Real Estate market. We are, however, very excited that first-time homebuyers in our community will be getting some assistance in gaining entry to the very important homeownership group.
The First-Time Home Buyer Incentive helps first-time homebuyers purchase a home without adding to their financial burden. Eligible first-time homebuyers 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. It is called a shared equity mortgage because the Government shares in any gains or losses on the home’s equity.
With this incentive, the 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
● The first time home buyer incentive is available to first-time home buyers with qualified annual incomes of $120,000 or less. A participant’s insured mortgage and the incentive amount cannot be greater than four times the participant’s qualified annual income.
● Borrowers must meet the minimum down payment requirement with traditional sources of savings.
How Much Can A First Time Buyer Borrow?
● You Qualified buyers can borrow up to the value of 4 times their qualifying income.
Here is an example
Anita wants to buy a new home for $400,000.
Under the First-Time Home Buyer Incentive, Anita can apply to receive $40,000 in a shared equity mortgage (10% of the cost of a new home) from the Government of Canada. This lowers the amount she needs to borrow and reduces her monthly expenses.
As a result, Anita’s mortgage is $228 less a month or $2,736 a year.
to get all the information you need about the program.
We strongly suggest discussing the various options with a mortgage professional or your realtor®; they will be happy to help you get the information you need. If you don’t have a realtor® or a mortgage professional, please let us know and we are happy to help.