TL;DR: sorry, no cheating on this one - you should really read the whole thing. You may also want to check out Our take on the FTHBI. There are some considerations you should really be thinking about before you take the plunge into this program.

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Funding available

The Government of Canada has allocated $1.25 billion over three years (starting in 2019) for this program. The program will be ready to receive incentive applications on September 2, 2019. The first closing will take effect on November 1, 2019.

5% or 10% shared equity mortgage

The incentive would allow eligible first-time home buyers, who have the minimum down payment for an insured mortgage, to apply to finance a portion of their home purchase through a form of shared equity mortgage with the Government of Canada. 

For the purchase of an existing home, an incentive amount of 5 percent is available. 

For the purchase of a newly constructed home, an Incentive amount of 5 percent or 10 percent is available to qualified buyers.

Mortgage-to-income requirement

The combined mortgage and incentive amount cannot exceed four times the total qualifying income. The amount for the mortgage loan insurance premium is excluded from this calculation.

Debt service guidelines

Maximum threshold: GDS 39% / TDS 44%.

Only applied on first mortgage and subject to requirements by lenders and mortgage loan insurers.

Reduce monthly mortgage payments

The Incentive enables first-time home buyers to reduce their monthly mortgage payment, without increasing the amount that they must save for a down payment. No on-going repayments are required, the Incentive is not interest bearing, and the homeowner can repay the Incentive at any time without a pre-payment penalty. The shared equity mortgage means that the government shares in the upside and downside of the property value.

Income requirement

Total qualifying income must be $120,000 per year or less. Income is subject to qualifying income requirements set out by lenders and default insurers.

Property Types

Eligible residential properties include:

  • new construction
  • re-sale home

Residential properties can include 1 to 4 units.

Types of residential properties include:

  • single family homes
  • semi-detached homes
  • duplex
  • triplex
  • fourplex
  • town houses
  • condominium units

Minimum down payment requirement

For 1-2 unit properties, 5% of the first $500,000 of the purchase price and 10% of the remainder of the purchase price, from traditional sources of down payment. For 3-4 unit properties, the minimum down payment is 10% of the lending value, from traditional sources of down payment.

Maximum down payment requirement

For a 10% Incentive, the maximum down payment is 9.99%. For a 5% Incentive, the maximum down payment is 14.99%.

Traditional sources of down payment

A traditional down payment comes from sources such as savings, withdrawal/collapse of a registered retirement savings plan (RRSP), funds borrowed against proven assets, or a non-repayable financial gift from a relative. Borrowed funds/non-traditional sources of down payment are not eligible.

Security

The Incentive will be a second mortgage on the title of the property, with no regular principal payments, is not interest bearing, and has a maximum term of 25 years.

The Incentive will have an equity-like payout, where the Program will share in the upside and downside of the property value upon repayment.

Repayment requirement

Trigger for repayment

The first-time home buyer will be required to repay the incentive amount after 25 years, or when the property is sold, whichever is earlier. The home buyer can also choose to repay the incentive in full at any time, without a pre-payment penalty. Refinancing of the first mortgage will not trigger repayment. 

Calculation of repayment amount

At time of repayment, if a home buyer receives a 5% (or 10%) incentive, the home buyer would repay 5% (or 10%) of the home’s value to the government. Repayment will be based upon the home’s fair market value.

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