First Time Home Buyer Incentive (FTHBI) is a unique program by the Government of Canada to encourage its residents to buy their own first home in Canada. Under this program Government contributes 5% to10% of down payment subject to few conditions to a first-time home buyer through a shared equity program. This contribution to the down payment lowers first time home buyer mortgage costs, making home ownership more affordable.
Government Incentive is a shared equity mortgage which means that the Government is sharing in the upside and downside of the property value. The buyer does not need to repay this amount to Government until full loan is repaid in 25 years or the home is sold.However, there are certain conditions to be eligible under this program:
- The household income of the applicant must be below $120000 per annum.
- The eligible applicant can borrow 4 times of their household income.
- The applicant did not occupy a home by him/her in the last four years.
- The down payment has to be between 5% to 14.99%;
- Only Canadian citizen, Permanent resident or non-permanent resident authorized to work in Canada qualify for this incentive.
FTHBI has recently been expanded for first-time home buyer buying a home in Toronto, Vancouver, or Victoria to be now eligible for an increased household Income of $150,000 instead of $120,000, and applicant can borrow 4.5 times instead of 4.0 times of their household income. It effectively means that a household earning of $150000 can now qualify for a home valued up to $722,000 where Government will put up to $72,200 i.e. 10% of total cost
Whether recent changes will benefit residents of these three cities:
Expert opinions differ on this recent change. Generally, such incentives are given to increase demand when there is crash in real estate market, however these three cities real estate market is already quite hot and the change may not add much fire.
Secondly even with increased borrowing of 4.5 times of household income, eligible participants would actually be able to borrow more using a traditional 5% down insured mortgage. The average house price is already quite high in these cities and not many new home buyers will be benefiting from this change.
Let us wait and see what effect this development brings in the real estate market of these three cities.
