If you are purchasing a home for the first time, the role of “First Time Home Buyer” can come with a lot of questions. Do I need a real estate agent? Where can I find a real estate lawyer? How much does it actually cost? And, of course, how do I get a mortgage?
Understandably, with all of these questions—and more!—swimming around in your mind, it can be easy to begin feeling overwhelmed. Luckily, that’s where a REALTOR® can help! We work in the realm of Saskatoon real estate each and every day, making us more than familiar with every question you can think of. Plus, we come with some other handy and even helpful information that can help you along the way—including the First Time Home Buyer Incentive.
What is the First Time Home Buyer Incentive?
The First Time Home Buyer Incentive is an initiative set out by the Government of Canada to help Canadians buy their first home. It provides a second, shared equity mortgage financed with the Government of Canada that helps to lower your monthly mortgage payments to the bank so you can get the house you want for a monthly cost that you can swallow. So how does it work?
How Does the First Time Home Buyer Incentive Work?
The First Time Home Buyer Incentive works like a 2nd mortgage on your new home, the 1st being your regular mortgage acquired from the bank. However, unlike the regular mortgage, the incentive is not subject to mortgage loan insurance premiums. Instead, it is counted as part of your “total down”, meaning it helps lower your monthly payment by showing your primary lender that you are contributing more up front.
The First Time Home Buyer Incentive allows you to borrow between 5 and 10% of the purchase price, depending on the type of home, and only pay it back at the percentage of the home value when it’s sold, or at the end of the 25-year window—whichever comes first. So, if the property value of your Saskatoon home goes up within that time, the payback will go up to match the new 5-10% of that valuation. Similarly, if the property value decreases at all, the payback will decrease with it!
How Much Will I Get from the Incentive?
The amount you will receive from the Incentive will change based on the type of home you are purchasing.
If you are purchasing a new build, you may receive 5-10%.
If you are purchasing an existing home, you may receive 5%.
If you are purchasing a new or existing mobile/manufactured home, you may receive 5%.
These amounts, however, are only on the condition that the home you intend to purchase has only 1-4 units and is suitable for full-time, year-round occupancy by yourself. Investment properties still do not qualify at this time.
Do I Qualify for the First Time Home Buyer Incentive?
In order to qualify for the First Time Home Buyer Incentive, there are a few conditions to meet. First, you must qualify as a first time home buyer. This is defined as any individual who has:
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Not purchased a home before
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Not occupied a home owned by themselves or their current spouse/common-law partner within the last 4 years
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Recently experienced a breakdown of a marriage or common-law partnership (regardless of whether the other first time home buyer conditions are met or not).
If any of these apply to you or your partner, then feel free to do a little happy dance, because you may qualify for the First Time Home Buyer Incentive! However, there are a few more eligibility requirements you must meet:
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You must have the minimum down payment needed for the home you intend to purchase with the incentive. (REMEMBER: in Canada, a minimum of 5% down is required, and any amount below 20% is subject to an insurance premium)
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Your total annual qualifying income must not exceed $120,000.
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Your total borrowing amount must not be more than 4x your annual qualifying income.
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You must be a Canadian citizen, permanent resident, or non-permanent resident that is authorized to work in Canada.
Other Important Information
While it may seem pretty enticing at face value, it’s always important to know all the additional details you may encounter with any mortgage, including the First Time Home Buyer Incentive.
The Incentive itself may not cost anything, but there may be added costs associated with getting it. For example, as your lawyer will technically be closing 2 mortgages in your deal, you may be charged a higher fee. And when it comes time to repay your incentive, you may need to pay for an appraisal to determine your property’s current fair market value.
Even if you may not have reached the 25-year term end date or be outright selling your home, there are some other status changes that can trigger the need for repayment. This includes: buying out your co-borrower and additional insured funds are needed, porting your mortgage to a new property, completing a partial release of security, or changing the intended property use.
As with anything in the world of finances, the First Time Home Buyer Incentive may seem pretty tricky to understand. But, with the right information to fuel your decision and the help of a Saskatoon real estate specialist, it can also be a very powerful tool in helping you to make your first step into owning a home. After all, they do call it an incentive for a reason!
For more information about the Incentive or to fill out the application forms, visit the Canada Mortgage and Housing Corporation online.
FAQs
How does the First Time Home Buyer Incentive lower my monthly mortgage payment?
The incentive provides a second, shared-equity mortgage financed by the Government of Canada. It counts toward your total down payment, which can reduce the amount you borrow through your primary mortgage and lower your monthly payment to the bank.
How much can I receive through the First Time Home Buyer Incentive in Saskatchewan?
The incentive may provide 5% of the purchase price for an existing home or a mobile or manufactured home. For a new build, the amount may be between 5% and 10%, depending on the applicable program conditions.
When do I have to repay the First Time Home Buyer Incentive?
You repay the incentive when you sell the home or at the end of the 25-year period, whichever comes first. Because it is shared equity, the repayment is based on the same percentage of the home's value, so the amount can rise or fall with the property's value.
What types of homes qualify for the First Time Home Buyer Incentive?
The home must have between one and four units and be suitable for your full-time, year-round occupancy. New builds, existing homes, and new or existing mobile or manufactured homes may qualify, but investment properties do not.
Who qualifies as a first-time home buyer for the incentive?
The program is intended for someone who has not purchased a home before or has not occupied a home owned by themselves or their current spouse or common-law partner. You will also need to meet the program's other eligibility and mortgage qualification requirements.
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