New CMHC First Time Home Buyer's Incentive - Is it for you?
Saturday Aug 24th, 2019Share
Buying your first home just became more affordable.
with the CMHC First Time Home Buyer Incentive
Buying your first home in Canada comes with a lot of questions and challenges. Making the biggest purchase of your life is never easy.
But, with the CMHC First Time Home Buyer’s Incentive, The Government of Canada is making it easier for you by reducing your monthly mortgage payments without increasing your down payment. And with no interests or ongoing repayments, home ownership can become a reality.
Given below are answers to some of the most common questions about this incentive:
A) WHAT IS NEW FIRST TIME HOME BUYER INCENTIVE?
The government announced they will dedicate $1.25 billion dollars over the next three years through the introduction of the CMHC Shared Equity Mortgage.
What this means is that home buyers earning $120,000 or less per year who are applying for an insured mortgage (anything less than a 20% down payment) may be eligible for an interest-free loan from the Canadian Mortgage Housing Corporation (CMHC) of up to 10% of the purchase price.
In a nutshell, the details of the incentive are:
- Buyers must have a minimum down payment of 5%
- Insured mortgages on resale properties can get a loan of 5% of the purchase price
- Insured mortgages on new build properties can get a loan of 10% of the purchase price
- The total mortgage amount can’t exceed four times the household income which is capped at $480,000
The loan itself will reduce the overall mortgage and make the monthly carrying costs slightly more affordable for buyers. With a maximum mortgage amount capped at $480,000 buyers at the very top of the eligible income bracket would have to buy a resale property that was no more than $512,000.
B) WHEN DOES THIS PROGRAM START?
The program is expected to be launched on September 2nd, 2019. Agreements written after September 2nd with a possession no earlier than November 1st, 2019 will be considered.
C) HOW DOES THE BUYER PAYBACK THE MONEY?
- The first-time homebuyer will be required to repay the Incentive amount after 25 years or when the property is sold, whichever comes first.
- The homebuyer can also repay the Incentive in full at any time, without a pre-payment penalty. Refinancing of the first mortgage will not trigger repayment.
- Before selling the property, the homebuyer must obtain approval of the sale from the Program Administrator.
D) HOW IS REPAYMENT CALCULATED?
- Repayment is based on the property’s fair market value at the point in time where repayment is required.
- If a homebuyer receives a 5% Incentive, the homebuyer will repay 5% of the home’s value at repayment.
- If a homebuyer receives a 10% Incentive, the homebuyer will repay 10% of the home’s value at repayment.
E) WHAT IF I AM UNABLE TO PAY BACK BOTH MY FIRST MORTGAGE AND THE INCENTIVE WHEN I SELL MY PROPERTY?
The Program Administrator will work with borrowers who are experiencing financial hardship on a case-by-case basis to offer solutions to the repayment requirements.
F) ARE THERE OTHER COSTS INVOLVED WITH THE FIRST TIME HOME BUYER INCENTIVE?
The incentive may be associated with additional costs:
- Additional Legal Fees: Your lawyer is closing 2 mortgages so you may be charged higher fees. Additional legal fees may incur when paying off the government incentive.
- Appraisal Fees: To repay your incentive, you may need to have an appraisal done to value determine the fair market value of your home.
- Other fees: Additional fees may be incurred throughout the life cycle of the incentive, like switching your first mortgage to a new lender or refinancing your first mortgage.
G) WHAT KIND OF PROPERTY CAN I PURCHASE?
- The Incentive is to help first-time homebuyers purchase their first home. Eligible residential properties include:
- new construction
- re-sale home
- new and re-sale mobile/manufactured homes
- Residential properties can include 1 to 4 units
- Types of residential properties include:
- single family homes
- semi-detached homes
- town houses
- condominium units
H) WHAT ABOUT MONEY SPENT ON RENOVATIONS?
The Program Administrator does not need to be notified prior to a homeowner completing renovations on their home. It is recommended however that the homeowner consider the cost and benefits of the planned renovations, as the Government of Canada will share in any appreciation of the market value at the time of Incentive repayment.
Please click on the link below to apply for it now:
For more details, please call us at 780 721 2200. Thanks!!