Enhancements to the First-Time Home Buyer Incentive

Beth Graddon

During yesterday’s Throne Speech, the federal government promised to move forward with enhancements to the First-Time Home Buyer Incentive, including in Canada’s largest cities, so more families can afford to buy their first home. No further definition was provided with regard to what this expansion means, or how further assistance will be provided to Canadians living in the pricier parts of the country. However, promises made by the Liberal government heading into the last election may provide some clues.

Last fall, the Liberal government pledged to expand and enhance the First-Time Home Buyer Incentive in the following ways:

• Increasing earning criteria from incomes under $120K to $150K
• Increasing qualifying home prices from a maximum of $480K to $750K for home buyers living in “hot markets” with especially high housing prices (including Vancouver, Victoria, and the Greater Toronto Area)

As it stands, the First-Time Home Buyer Incentive offers a shared equity mortgage with the CMHC. The program reduces the down payment first-time buyers are required to make out of pocket, due to CMHC, Canada Guaranty or Genworth assistance which also reduces their monthly mortgage payments. This coverage is subject to a mortgage insurance premium.

Under current terms, the program offers to cover:

• 5% or 10% for a first-time buyer’s purchase of a newly constructed home
• 5% for a first-time buyer’s purchase of a resale (existing) home
• 5% for a first-time buyer’s purchase of a new or resale mobile/manufactured home

Homebuyers are required to repay the amount received from the program at the time of resale. This is based on the property’s fair market value at the time of repayment. If a homebuyer received a 5% Incentive, they would repay 5% of the home’s value at repayment. If a homebuyer received a 10% Incentive, they would repay 10% of the home’s value at repayment. The homebuyer must repay the Incentive after 25 years, or when the property is sold, whichever comes first. The homebuyer can also repay the Incentive in full any time before, without a pre-payment penalty.

If the Throne speech was in fact alluding to implementing previously proposed changes in suggesting that there are enhancements imminent, it would help by making it more accessible to a greater number of middle-class income earners trying to enter pricey housing markets.

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