The First-Time Home Buyer Incentive program was closed by the government of Canada on March 31, 2024 and replaced by First-Time Home Buyer Savings Account, which helps you buy your first home using tax-free savings. It is a better alternative to the incentive program as it lets you grow your savings while you save the full amount needed and own 100% equity in your home. It also takes away the complicated eligibility criteria.
Here’s more about the First-Time Home Buyer Savings Account (FHSA):
- you must be above 18 and below 71 years of age to open this account and have a Social Insurance Number
- you must not have owned a home where you lived in this year and the previous 4 years
- you can contribute tax-free for up to 15 years and save up to $40,000 towards your first home
- any unused room can be carried forward to the next year for only up to $8,000
- you can potentially reduce your tax payment and use unused credits indefinitely
- investment earnings are tax-free as long as you use it towards your first home purchase
- you can use this program in combination with the Home Buyers’ Plan
Read more information about FHSA here.
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Being a first-time home buyer in today’s real estate market is tough. House prices continue rising along with the mortgage interest rates, making houses unaffordable. To address this issue and provide some relief to first-time home buyers in Canada, the government offers an incentive to help reduce your monthly mortgage payments. Keep reading for more information.
What is the first-time home buyer incentive?
Administered through the Canada Mortgage and Housing Corporation (CMHC), the First-Time Home Buyer Incentive program is aimed at reducing the financial burden of first home buyers in Canada without making them put down a higher down payment.
In simple terms, the national government lends you up to 10% of your total purchase price towards your down payment. The actual percentage depends on the property type. This is called a shared equity mortgage, which means the government will own a part of your property. If you ever choose to sell it, you have to pay back the government the percentage according to the market price of the property at that time.
How do I qualify for the first-time home buyer incentive in Brampton?
Here’s how you can qualify:
- Must be a permanent resident or citizen of Canada or a non-permanent resident who holds a legal working status in Canada
- You and/or anyone you’re buying the property with must be a first-time home buyer
- Combined annual income of the buyers should be:
- $120,000 or less if you’re buying in rest of Canada (outside Census Metropolitan GTA, GVA, and Victoria)
- $150,000 or less if you’re buying in Census Metropolitan GTA, GVA, and Victoria
- You should have 5% of down payment
- Your mortgage amount has a maximum limit, which is:
- Four times your combined qualified annual income plus down payment for a property purchased in the rest of Canada
- 4.5 times qualified annual income plus down payment for a property purchased in the Census Metropolitan GTA, GVA, and Victoria
What kind of properties in Brampton qualify for the incentive?
All kinds of new construction and resale homes in Brampton qualify under the program. These include single family homes, semi-detached homes, townhomes, condominiums, and mobile homes.
How does the federal government decide the percentage?
For new construction properties, the percentage can be 5 to 10%. For resale properties and mobile homes, it is always 5%.
Do I have to pay back the amount?
Yes, you have to pay back the amount because it’s borrowed and the federal government is only investing in your property. You have to pay the amount back if you sell the home or after 25 years of owning your first property. You can choose to prepay without having to pay any penalties.
For example, you bought a house that costs $500,000 and you received 10% of the amount, which is $50,000. When selling that house, the value is $600,000, you’ll have to pay back $60,000, which is 10% of the current market value. If the value falls down to $300,000, you’ll only have to pay $30,000, since that’s the 10% of current market value.
Hi! Thank you reading the article. I hope it helps you understand the incentive program better. I am Catherine Nacar, your local real estate agent in Brampton. I’m here to help you on the journey of becoming a first-time home buyer in Ontario. Reach out to me +1 (905) 867-4828 or cnacar.realtor@gmail.com and let’s get to know each other.