With the forthcoming incentive program being introduced by the Canadian government now upon us close, we want to make sure our valued clients fully understand the program itself and how it can benefit those entering the housing market. Buying your first home can be an overwhelming process, but when you are equipped with the knowledge and experience that a Licensed Mortgage Broker can provide, you will be confident with each informed decision you make.
Here, we will go through the details of this new program and educate individuals on how to qualify for this exciting opportunity.
How the New Incentive Works
To assist new home buyers entering the increasingly-expanding housing market, the Government of Canada is releasing the First-Time Home Buyer Incentive. Rolling out on September 2nd, 2019, this new program aims to take the financial burden off new homeowners by supplying those who qualify:
● 5% of the purchase on a resale home
● 5% or 10% of the purchase on a new build
By taking advantage of this program, saving for a new home in Ontario will be more attainable for new buyers and payments will cause less burden once the home is purchased. With this program, the Government of Canada has a shared interest in the property’s value, as the incentive is considered a Shared Equity Mortgage (SEM). Though no interest or regular repayments of the incentive are required, there are some stipulations regarding the program.
How is the Incentive Repaid?
Those who qualify for this new incentive will not face monthly repayments, nor will interest be charged on the amount given. However, a set amount will be due at the first of the following events:
● at the time you sell your home
● upon owning the home for 25 years
The amount of your repayment will be determined based on the value of the home at the time of repayment — not at the time of purchase. The amount you will owe will correlate with how much you originally received. Those that were given incentives of 5% will be required to pay back 5% of the new value, while those that received 10% will make a repayment of 10%. Please note that you can voluntarily repay the incentive at any time before it is due without incurring penalties.
How to Qualify
This special provision from the government is reserved for those who earn a combined family income of $120,000 or less. All applicants must be Canadian Citizens, permanent residents or those who are legally authorized to work in Canada. The buyer’s portion of the down payment must come from traditional sources. Additionally, at least one of the applicants must be a first-time homebuyer as per the following definitions:
● Someone who has never purchased a home (first time buyer)
● Someone who has gone through a marriage or common-law partner breakdown
● Someone who has not lived at a spouse or partner’s home in the last 4 years (this period starts January 1st, four years prior to the date of funding and ends 31 days before funding)
More important qualifications regarding the actual mortgage include:
● Mortgage must be insured under CMHC or Genworth (premiums are not charged on FTHBI portion)
● Mortgage must be greater than 80% of the property value
● Maximum debt ratios are a GDS of 39% and a TDS of 44%
● Total amount borrowed does not exceed 4 times the household income
Act Now and Benefit for Years to Come
This exciting opportunity for new home buyers will allow many more Canadians to expand their horizons and enter an investment market they previously may have not been able to attain. Licensed Mortgage Agent Gerard Buckley can guide you through the home buying process with this new incentive, giving you access to useful tools that will help you calculate your maximum purchase price, estimate your incentive repayment amount and determine what your monthly mortgage payments would be, as well.
The government has put a cap of $1.25 billion on this incentive, only available over the next three years. It’s a first-come, first-serve opportunity that will allow your household to begin the rewarding journey of homeownership. Call Gerard today at 705-532-1182 and take hold of your future.
t’s a first-come, first-serve opportunity that will allow your household to begin the rewarding journey of homeownership. Call Gerard today at 705-532-1182 and take hold of your future.