Written by Steven Crews, MyMortgageBroker.com
As of September 2, 2019, the federal government’s home buyer’s incentive has begun. I think that this is a fantastic program that every first-time home buyer should consider. Let’s see how it works.
What is the home buyer’s incentive?
The first-time home buyer’s incentive program is a government shared equity program run through CMHC where you receive money in the amount of 5% or 10% of your purchase price. The money you receive is given with no interest to pay. It’s set up as a 25-year term and repayment is required when you sell or at the end of the 25-year term, which ever comes first.
How do you qualify for the incentive?
There are 5 main requirements to qualify:
- you must be a first-time home buyer
- your qualifying income must be 120,000 per year or less
- the maximum mortgage amount is no greater than 4x your qualifying income
- you must come up with 5% down from your own resources or from a gift.
Calculate how much you qualify for by visiting https://MyMortgageBroker.com/Incentive
What factor determines whether I receive 5% or 10% incentive?
To receive 10% incentive, you must purchase a new construction home or condo. If you purchase a re-sale home or a re-sale condo you will only receive 5% incentive. You can also receive 5% incentive for the purchase of a new or used mobile home or modular home.
How do I pay back the money?
You must pay the money back if you sell your home. The incentive has a 25-year term and will become due in full the 25th year you lived in your home.
How do I calculate how much I have to pay back?
When you pay back the money, you would multiply the incentive you received (either 5% or 10%) by the market value (sale price) of your home. Let’s look at a couple of examples:
You bought your home for $400,000 and received $20,000 incentive. This is 5% of your purchase price. Let’s compare 3 examples:
- If you sold for $400,000, then you would pay back 5% of that price or $20,000.
- If you sold the home for $450,000, then you would pay back 5% of that amount or $22,500.
- If you sold your home for $350,000, then you would pay back $17,500.
There are several benefits to first time home buyers who qualify for this incentive. If you qualify, I would recommend that you take advantage of it. At the least, you will have a lower mortgage payment than if you didn’t take advantage of the program.