What is the First Time Home Buyers Incentive? And will it truly help Canadians who are ready to commit to buying a home?
It’s a system in place by the Canada Mortgage & Housing Corporation, however mortgage brokers in Toronto & Vancouver will tell you that this cause will only benefit first-time buyers with properties that are outside of Canada’s most expensive cities.
Here are the FTHBI facts the CMHC has shared so far:
- It is expected that approximately 100,000 first-time home buyers would be able to benefit from the Incentive over the course of the program’s three years.
- FTHBI is limited to households with a maximum combined income of $120,000. In addition, the program caps out at four times the applicant’s annual income, which means it can only help homeowners looking to buy properties where the mortgage value including the CMHC loan doesn’t exceed $480,000.
- The maximum equity CMHC will take in a first home purchase is 10% of a newly built home and 5% of an existing home. It will also require borrowers to meet minimum insured mortgage down payment requirements.
Families will have lower monthly mortgage payments due to no ongoing payments however, they will still need to pass the B-20 stress test to prove they can handle the interest rates. Each buyer will also need to be pre-approved, qualify for a mortgage and prove they can carry that mortgage as well as keep up with their living expenses.
The CMHC says they are confident the program will work in all markets, despite the income and borrowing limits. Pointing out average market prices ($770,000 in Toronto) are well beyond the cap, but there is still 23% of transactions in Toronto for homes that were under $500k.
The Home Buyers Plan, which allows first-time home buyers to withdraw funds from an RRSP to purchase or build a home without having to immediately pay tax on the withdrawal. In 2019, the government increased to $35,000 from $25,000 per spouse or partner. Amounts withdrawn must be repaid to the RRSP over a 15-year period.
Over the next several months, first-time home buyers can top up their savings and start talking to their brokers and agents to prepare for the coming investment opportunity.
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