Are you a first time home buyer in Canada? If so, you may be eligible for the First Time Home Buyer Incentive (FTHBI) program. This program was introduced by the Canadian government in 2019 to help make homeownership more affordable for first-time buyers.
In this article, we’ll explore the details of the FTHBI program, including who is eligible, how it works, and how it can benefit you as a first-time home buyer in Canada.
What is the First-Time Home Buyer Incentive (FTHBI) Program?
The FTHBI program is a shared equity mortgage program that allows eligible first-time home buyers to finance a portion of their home purchase through a shared equity mortgage with the Canadian government. This means that the government will contribute a portion of the down payment for your home, reducing your monthly mortgage payments and making homeownership more affordable.
How Does the FTHBI Program Work?
The FTHBI program provides eligible first-time home buyers with a shared equity mortgage of 5% for a resale home or 10% for a newly constructed home. This means that the government will contribute 5% or 10% of the purchase price of your home, depending on whether it is a resale or newly constructed home.
The shared equity mortgage is interest-free and does not require ongoing payments. However, when you sell your home or after 25 years, whichever comes first, you will need to repay the same percentage of the home’s value at the time of purchase. For example, if you received a 5% shared equity mortgage, you will need to repay 5% of the home’s value at the time of sale or after 25 years.
Who is Eligible for the FTHBI Program?
To be eligible for the FTHBI program, you must meet the following criteria:
- Be a first-time home buyer (you have not owned a home in the last four years)
- Have a combined household income of $120,000 or less
- Have a minimum down payment of 5% for a resale home or 5% for a newly constructed home
- Have mortgage loan insurance from the Canada Mortgage and Housing Corporation (CMHC) or a private insurer
- Have a maximum purchase price of four times your household income
Additionally, you must meet the following requirements:
- You must intend to live in the home as your primary residence
- You must have a maximum debt-to-income ratio of 39% (calculated by dividing your total monthly debt payments by your gross monthly income)
- You must have a minimum credit score of 680
- You must have a maximum total borrowing amount of four times your household income
How Can the FTHBI Program Benefit First-Time Home Buyers?
The FTHBI program can benefit first-time home buyers in several ways:
Affordable Housing
The FTHBI program can help make homeownership more affordable for first-time buyers. By providing a shared equity mortgage, the government is reducing the amount of money you need to borrow, which can lower your monthly mortgage payments and make it easier to afford a home.
Tax Credits
As a first-time home buyer, you may also be eligible for tax credits, such as the Home Buyers’ Amount. This non-refundable tax credit allows you to claim $5,000 on your tax return for the purchase of a qualifying home. This can help offset some of the costs associated with buying a home, such as legal fees and land transfer taxes.
How to Apply for the FTHBI Program
To apply for the FTHBI program, you will need to follow these steps:
- Determine your eligibility: Before applying, make sure you meet all the eligibility criteria for the FTHBI program.
- Get pre-approved for a mortgage: You will need to get pre-approved for a mortgage from a lender that offers the FTHBI program. This will help you determine how much you can afford to borrow and the amount of the shared equity mortgage you may be eligible for.
- Find a home: Once you have been pre-approved, you can start looking for a home that meets the program’s requirements.
- Apply for the FTHBI program: Once you have found a home, you can apply for the FTHBI program through your lender. They will submit your application to the CMHC for approval.
- Complete the purchase: If your application is approved, you can complete the purchase of your home and receive the shared equity mortgage from the government.
Real-Life Examples of the FTHBI Program in Action
Sarah’s Story
Sarah is a first-time home buyer in Toronto, Ontario, with a household income of $100,000. She has been saving for a down payment for several years but is struggling to find a home within her budget. With the help of the FTHBI program, Sarah is able to purchase a home for $500,000 with a 5% down payment. The government provides her with a shared equity mortgage of $25,000, reducing her monthly mortgage payments and making homeownership more affordable.
Michael’s Story
Michael is a first-time home buyer in Vancouver, British Columbia, with a household income of $120,000. He has been renting for several years and is ready to purchase his first home. With the FTHBI program, Michael is able to purchase a newly constructed home for $800,000 with a 10% down payment. The government provides him with a shared equity mortgage of $80,000, reducing his monthly mortgage payments and making homeownership more affordable.
Other Programs for First-Time Home Buyers in Canada
In addition to the FTHBI program, there are other programs available for first-time home buyers in Canada. These include:
- Home Buyers’ Plan (HBP): This program allows first-time home buyers to withdraw up to $35,000 from their Registered Retirement Savings Plan (RRSP) to use towards the purchase of a home.
- GST/HST New Housing Rebate: This rebate allows first-time home buyers to recover some of the GST or HST paid on a newly constructed home.
- Land Transfer Tax Rebate: This rebate allows first-time home buyers to recover some of the land transfer tax paid on a home purchase.
The First-Time Home Buyer Incentive (FTHBI) program is a valuable resource for first-time home buyers in Canada. By providing a shared equity mortgage, the government is helping to make homeownership more affordable and accessible for those who may not have been able to afford it otherwise. If you are a first-time home buyer in Canada, be sure to explore the FTHBI program and other available resources to help you achieve your dream of homeownership.
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