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First time home owner

GET DOWN PAYMENT ASSISTANCE TO BUY YOUR FIRST HOME

The First Time Home-Buyer Incentive program (FTHBI) was launched on September 2, 2019, by the
Canadian Mortgage and Housing Corporation. It will save first time home buyers money on their first
home purchase and make homeownership more affordable.

The sky-rocketing housing prices in Vancouver and Toronto have made buying the first home almost
out of reach for most Canadians. In British Columbia, real estate prices have not only sky-rocketed in
Vancouver, but also in the neighboring cities like Surrey and Abbotsford. Even the cities in Fraser
Valley like Kamloops, Harrison Hot Springs, and Kelowna are going up in prices rapidly.
The stress-test and even more stringent underwriting guidelines of banks introduced in January 2019
have made buying your first home or even refinancing or getting a second mortgage more difficult.
The FTHBI definitely help the first- time home-buyers by providing them from 5% to 10% additional
down payment assistance. The keyword is “additional”. Some buyers are under the impression that
since the government is willing to pitch in as much as 10% down-payment, they do not need to put
any money down from their pocket. It does not work like that. The government and the lenders want
you to put a minimum of 5% down-payment from your savings. The down-payment can also come as
a gift from a family member.

first time home owner
Before the FTHBI, a whole lot of borrowers will put down 10% to 15% down-payment and borrow
the rest as a private second mortgage. No need for that anymore. The FTHBI is a huge help to first-
time home-buyers.
The First Time Home Buyer Incentive will reduce the monthly mortgage payment for the first time
home-buyer. This will help a whole lot of potential buyers across Canada to qualify and buy their first
home.

What does it take to qualify for the FTHBI?

● A combined household income of no more than $120,000
● The insured mortgage and incentive cannot be more than four times the participants’ qualified
annual household income
● The incentive is 5% on the resale of an existing home and 10% on a newly constructed home
● Interest-free and no payments are due on the incentive portion of the down payment until the
home is sold or the down payment is paid-off or at the end of the 25 years
● The incentive can be repaid in full at any time without penalties in a lump sum of the %
valuation of the home at the time of the pay-off.

● Unless paid-of earlier, at 25 years the homeowner repays 5 or 10% of the home’s value at that
time rather than the amount received from CMHC. In the unlikely event of the home losing
value, the owner and CMHC share the loss.
● At least one homeowner must be a first-time homebuyer, which is considered as the
following:
• Have never purchased a home before
• Have gone through a breakdown of a marriage or common-law partnership (even if the other
first-time homebuyer requirements are not met)
• In the last 4 years did not occupy a home that was occupied by the homebuyer or their spouse.
● You must occupy the home. Investment properties are not eligible.
● Mortgages must be eligible for mortgage loan insurance through either Canada Guaranty,
CMHC or Genworth.
● The first mortgage must be greater than 80% of the value of the property and is subject to a
mortgage loan insurance premium.

First time home buyers

The Benefit to the First Time Home Buyer:

“The First Time Home Buyer Incentive Program helps the buyers who would otherwise not be able to
own their own first home. It not only assists the buyers with the additional down payment but since it
is interest-free, it also helps them with reduced monthly mortgage payments which in turn helps them
to qualify for a higher mortgage amount,” says Paramjeet Singh, CEO of Benevolent Bancorp.
The interest rates are still low and the market still soft. Add the FTHBI to those two factors and it
makes this the best time to buy your first home.

Jeet Singh is a writer and a mortgage advisor. He can be reached at [email protected]