First-Time Home Buyer Incentive

The First-Time Home Buyer Incentive made it easier for qualifying homebuyers to buy a home and lower their monthly mortgage payments. Just as the name implies, this incentive was for first-time homebuyers.

This program was a shared equity instrument. It worked by getting an extra 5% or 10% of the down payment of the home and then repaying the government either 5% or 10% of the property’s market value at the time of repayment, up to a maximum repayment amount equal to:

• In the case of appreciation, the Incentive amount plus a maximum gain to the government of 8% per year (not compounded) on the Incentive amount from the date of advance to the time of repayment.
• in the case of a depreciation, the Incentive amount minus a maximum loss to the Government of 8% per year (not compounded) on the Incentive amount from the date of advance to the time of repayment.

A first-time homebuyer must have met at least one of the following criteria:

• never purchased a home before
• did not occupy a home that the buyer or their current spouse or common-law partner owned in the last 4 years
• recently experienced the breakdown of a marriage or common-law partnership

There were a few criteria to determine eligibility for the First-Time Home Buyer Incentive:

• total annual qualifying income didn’t exceed $120,000 ($150,000 if the home purchased was in Toronto, Vancouver or Victoria)
• total borrowing, meaning the amount of the mortgage plus the amount provided by the program, was no more than 4 times the qualifying income (4.5 times if the home was in Toronto, Vancouver or Victoria)
• the buyer or their partner was a first-time homebuyer
• the buyer was a Canadian citizen, permanent resident or non-permanent resident authorized to work in Canada
• the buyer met the minimum down payment requirements with traditional funds (savings, withdrawal/collapse of a Registered Retirement Savings Plan (RRSP) or a non-repayable financial gift from a relative/immediate family member)

The Incentive was like a second mortgage on the home. The first mortgage had to be greater than 80% of the value of the property and was subject to a mortgage loan insurance premium. It also had to be eligible through Canada Guaranty, CMHC or Sagen.

The insurance premium was based on the loan-to-value ratio of the first mortgage only. That is, the first mortgage amount divided by the purchase price. Buyers didn’t pay mortgage insurance on the incentive — it was included with the total down payment.

Other details you need to know

There may have been additional costs associated with the Incentive:

• Additional legal fees: Your lawyer is closing 2 mortgages so you may be charged higher fees.
• Appraisal fees: To repay your incentive, you may need to have an appraisal done to 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.
• Property Insurance premiums: Additional costs may be incurred to account for an additional mortgage registered on the property. Talk to your insurance broker or insurance provider to find out more details.

Repayment Details

The Incentive must be paid in full — that is no partial payment — after 25 years or when the home is sold. There are a few ways where changes to the Incentive can trigger repayment:

• You go through a breakup and you want to buy out the co-borrower. If this requires additional insured funds, you must pay back the Incentive in full.
• Porting your mortgage will trigger a repayment of the Incentive.
• A partial release of security is considered a sale and will trigger repayment of the Incentive.

Use these informational pieces to understand more about the Incentive

• Repayment Document (PDF): A step-by-step process along with key information.
• Appraisal Document (PDF): Appraisal checklist to be provided to the appraiser in the case of a voluntary repayment or at the 25-year mark.
• Operational Policy Manual (PDF)
• Questions & Answers (PDF)

Borrowers should discuss with their lender if repayment of the Incentive is required under certain refinancing situations.