Canada First-Time Home Buyer Incentive Program

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Overview Of First-Time Buyer Incentive Program

The First-Time Home Buyer Incentive Program is an initiative by the federal government to help Canadian residents buy their first home. It is a shared equity program.

Under this program, the government will provide you with 5% (for an existing house) or 10% (for a newly built house) of the house value to purchase your first home.

For this, the government also will share the house’s equity benefits if you sell your home before the end of the 25-year amortization period.

The Structure Of The First-Time Home Buyer Incentive Program

This program is an interest-free loan forgivable if all conditions are met after a certain period.

The loan is forgivable after 25 years. You’ll have to pay back the amount borrowed and a proportion-appreciated property value if you choose to sell the house before the end of the 25 years.

The incentive is registered as a second lien or a second mortgage on your property.

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First-Time Home Buyer Incentive Example Calculation

For example, if you want to use this incentive to buy an existing property that is priced at $400,000:

Government incentive = 5% x $400,000 = $20,000

If, after three years, you sell the house for $570,000

You will have to repay the government the following:

The initial incentive amount of $20,000 PLUS 5% of the property’s increased value

Increased value = current market price – purchase price

$570,000 – $400,000

= $170,000

The first-time homebuyer incentive share of the increased property value is calculated as

5% of $170,000.00 = $8,500.00

Pay back amount = incentive amount + proportion of increased property value

= $20,000 + $8,500 = $28,500

You will pay the government $28,500 if you sell the house before your initial 25 years amortization period ends.

Is The First Home Buyer Incentive Worth It?

If you decide that taking this incentive is worth it on a comparable basis, this loan will help you save on interest payments. It will also help you reduce your default insurance premium cost by putting more money down with the incentive.

The incentive amount is added to your down payment.

If you make a 5% down payment plus the 5% incentive, your total down payment will be 10%.

How To Qualify For The First Time Home Buyer Incentive Program

Here are several eligibility requirements when applying for the First Time Home Buyer Incentive Program:

You must be at least 18 years old.
You must be a resident of Canada.
The home is occupied as your principal residence.
You must not have owned a home or have an ownership stake in a house anywhere in the world at any given time.
Your spouse or common-law partner must not have owned a home while you were partner.
The house price must not be four times your qualifying income or 4.5 times your qualifying income if buying in Toronto, Vancouver, or Victoria.
If you are not living in Toronto, Vancouver, or Victoria, your annual household income must not exceed $120,000.
If you live in Toronto, Vancouver, or Victoria, your annual household income must not exceed $150,000.
You must pay the minimum down payment requirement (which is 5% of the property value), and it must come only from these sources:
- Savings
- Withdrawal from RRSP (Registered Retirement Savings Plan)
- A non-repayable monetary gift from family members

Here are some reasons why a Canadian citizen might be ineligible for the First Time Home Buyer Incentive Program:

If the purchase price of the house is more than $500,000.
If you are putting down more than 20% of the purchase price

How To Apply For The Incentive Program

Find a home you want to purchase.
Get pre-approved for a mortgage.
Check your eligibility with the requirements listed above.
Fill out two application forms (FTHBI – SEM Information Package & SEM Attestation and Consent Form).
Submit the form to your lender. They will be the ones to process your application for you.
Submit the final signed copy of the mortgage package to your solicitor.
Once you receive acceptance, contact FNF Canada at 1-855-844-4535 for them to activate your incentive.
Give your lawyer or notary’s name.
Accomplish all these tasks two weeks before the closing date.

Things to Keep In Mind

The incentive is not a fixed amount. The actual incentive amount is determined by applying the 5% rule for an existing property or 10% for a newly built property.
If it is considered an incentive, it is treated as a lien registered against your home. However, there are no monthly payments for this loan, but the loan must be paid in one lump sum.
Aside from the 25-year limit or selling the house that triggers repayment, you also will be required to pay off this loan when
- Refinance the mortgage
- Sell the house
- Porting the mortgage
- Separating with your partner or spouse and one party paying out the other party.

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A Few First Time Home Buyer Incentive Program FAQ

How long will the program last?

The Canadian government first home buyer incentives launched on 2 September 2019 and will end either on 2 September 2022 or when $1.25 billion worth of incentives have been granted, whichever comes first.

How much will I need to pay back?

Your loan amount is dependent on the future market value of the home. It would be either 5% or 10% of the total property value, without interest, and the amount must be shared with the government.

When will I need to repay the incentive?

The threshold for incentive repayment is within 25 years or when you sell your property. Keep in mind that the government does not allow staggered payments. The payment must be a lump-sum amount. However, if you’re paying early, there will be no fees or penalties.

I want to purchase a mobile home. Do I still qualify for the program?

Yes. But you will only be allowed to apply for 5%, even if the mobile home is brand-new.

Other First-Time Home Buyer Programs To Consider

Home Buyers' Plan (HBP)

This plan allows you to withdraw up to $35,000 (up to $70,000 for couples) from your Registered Retirement Savings Plan (RRSP) without any penalties to help you buy your first home.

You have 15 years to repay this money to your RRSP account. The first year after purchasing the house is the grace period, so repayment is required.

Learn More: A Comprehensive Overview Of The First-Time Home Buyer Plan

Land Transfer Tax Rebates

You must pay a land transfer tax or a land registration fee when you buy a house in a specific province, territory, or city within Canada.

These taxes are administered by the land registry of each province or territory.

Some provinces and cities offer these taxes rebates, which will help with the closing costs.

For example, qualified first-time homebuyers in British Columbia and Ontario can receive land transfer tax rebates.

Land Transfer Tax Guides By Provinces

GST/HST New Housing Rebate

You might also be entitled to a GST or HST rebate from the federal government or your provincial government.

This rebate is available to all homebuyers, not just first-time homebuyers.

To be eligible for this rebate, the house needs to be newly built or substantially renovated if it is an existing house.

The rebate depends on the home’s purchase price, and the house price must be $450,000 or less.

First Home Buyer Tax Credit?

The First Home Buyer Tax Credit, or simply the home buyer’s tax credit, is a program offered by the federal government to make homeownership accessible to Canadian residents looking to buy their first home.

This program allows eligible first-time buyers to claim \$5,000 as an income tax credit on a qualifying home. The $5,000.00 tax credit can get you a $750 tax rebate.

This program was introduced in 2009 as part of the federal government’s Economic Action Plan to help Canadians buy their first home.

The tax credit must be claimed within a year of buying your first home, and the purchased home must satisfy the qualification criteria outlined below.

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Canada First-Time Home Buyer Incentive Program

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Skip To...

Overview Of First-Time Buyer Incentive Program

The Structure Of The First-Time Home Buyer Incentive Program

Shop Across 25+ Lenders For Your Best Mortgage Deals

First-Time Home Buyer Incentive Example Calculation

Is The First Home Buyer Incentive Worth It?

How To Qualify For The First Time Home Buyer Incentive Program

How To Apply For The Incentive Program

Things to Keep In Mind

Shop Across 25+ Lenders For Your Best Mortgage Deals

A Few First Time Home Buyer Incentive Program FAQ

Other First-Time Home Buyer Programs To Consider

Home Buyers' Plan (HBP)

Land Transfer Tax Rebates

Land Transfer Tax Guides By Provinces

GST/HST New Housing Rebate

First Home Buyer Tax Credit?

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