A Guide To Canada's First-time Home Buyer's Incentive

As soon as September 2nd, 2019, eligible First Time Home Buyers will be able to apply for shared equity loans with the Federal Government in a bid to make housing more affordable.

The government will require Buyers to already have a minimum down payment, show they make less than $120,000 per year, and cap the purchase price at 4x a Buyers qualifying income among other regulations. In return, a Buyer will be eligible to receive an interest-free loan (branded the first-time home buyer's incentive by the government), up to 5% of the purchase price for resale and up to 10% for new construction.

The loan will be due in 25 years but does not require payments effectively lowering monthly mortgage bills by up to $200. It's a way of providing relief from the mortgage stress test for first-time Buyers by adding back a measure of improved debt ratios and cash flow.

However, Buyers should note, if the property rises in value over the term of the equity loan, the government will take the same percentage increase based on the overall value. In the event the property decreases in value, the government is also responsible for the same percentage loss. Should a Buyer wish to pay the government loan out, it will be based on the value of the property at that time.

How To Best Leverage The First Time Home Buyer's Incentive

Investment Property Not Limited

A savvy first-time Buyer could use the added buying power to buy an investment property. Considering that the first-time home buyer's incentive is interest-free, it offers an immediate improvement on the cash return from an investment property and maybe the boost needed to get within striking range

New Construction

New construction is pricier than resale but you get an asset that should not require much maintenance over the next 10-15 years. A 10% bump on your downpayment could provide significantly more purchasing power and allow for some upgrades as well. Builder base models have been improving over the years but some upgrades can't be retrofitted later.

Find Professionals Who Can Help With Applications

Benjamins Realty Inc works with leading finance professionals in Waterloo Region including key partnerships with major banks. We also specialize in working with first-time buyers whether they are looking for a condominium, townhouse, or single-family home.

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If you have further questions about the first-time home buyer's incentive feel free to connect with us at any time.

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