The FTHBI is a shared-equity mortgage program, meaning the government shares in the gains and losses of your home’s value as it fluctuates over time. Through the incentive, Canada Mortgage Housing Corp. (CMHC) will offer 10 per cent toward the down payment for a new home, and five per cent for resale homes, interest-free.
You or your partner must be a first-time Home Buyer with a combined household income of $120,000, and the minimum five-per-cent down payment requirement to apply. You must be a Canadian Citizen, Permanent or Non- Permanent resident authorized to work in Canada. The property must be your principal residence and the price of the mortgage plus the incentive amount cannot exceed more than four times your household income. You will incur additional legal fees as your lawyer is closing 2 mortgages. In addition, you will pay an appraisal fee to determine the value of your home when you sell.
Borrowers must pay the CMHC back after 25 years or once the home sells – whichever happens first. You can also pay back the loan early without penalty. The amount borrowers owe may increase or decrease depending on how the value your home changes over time. If the home’s assessed value rises, the loan repayment will increase by the same per cent. However, the same will occur if the home has lost value by the time it is sold or the mortgage matures.
Example of purchasing a new home for $400,000. Under the First-Time Home Buyer Incentive you can apply to receive $40,000 in a shared equity mortgage (10% of the cost of a new home) through the program. Years later you sell your first home for $420,000. At this time you will now have to repay the original incentive you received as a percentage of your home’s current value. This would result in you repaying 10%, or $42,000 at the time of selling her house.