For many first-time homebuyers, purchasing a house is a lofty goal. Housing prices in the Toronto and Markham area are exceptionally high with the average house price in Toronto costing $852,057. On September 2, 2019, the federal government launched the First-time Home Buyer Incentive. This nationwide program helps qualified first-time buyers to reduce their mortgage and have an easier time qualifying for a home.
Here are a few things you should know about the incentive.
How Does the Incentive Work?
The incentive is designed to decrease monthly mortgage payments for first-time buyers without requiring larger down payments. It does not affect the interest rate nor ongoing repayments. The First-Time Home Buyer Incentive states that the government of Canada will provide either 5% for a first-time buyer’s purchase of a resale house or up to 10% for the purchase of a new construction home.
When you receive the incentive, it comes as a shared equity mortgage. However, you do not have to make monthly payments on the mortgage and there is no interest charged.
Will I Have to Pay Back the Incentive?
Yes, first-time buyers will have to pay back the incentive they receive. However, repayment is not required right away. The homeowner must pay back the incentive after 25 years that they live in the home or when they sell the property. However, the homeowner has the option to repay the incentive at any time and will not face any penalty.
- If a homebuyer receives a 5% incentive, the homebuyer will repay 5% of the home’s value at repayment.
- If the homebuyer receives a 10% incentive, the homebuyer will repay 10% of the home’s value at repayment.
Keep in mind that there may be additional costs associated with repayment including legal and appraisal fees.
Who is Eligible to Receive the Incentive?
Not everyone is eligible to receive the incentive and first-time homeowners aren’t the only people who can receive it. To apply, you must fall under one of the following categories:
- Be a first-time buyer
- Have recently gone through a divorce
- Have not lived in a home you have owned for a minimum of four years
Additional requirements to receive the incentive include:
- Your household income must be less than $120,000.
- You must be borrowing less than four times your qualifying income.
- You must meet the minimum down payment requirements.
While the First-Time Home Buyer’s Incentive certainly has its benefits, it may not be best for everyone. For more information on purchasing a home in the Markham area or to begin your house hunt, contact Markham real estate agent Martin MacFarlane today.