The purpose of the home buyer's incentive is to help a first time home buyer with down payment. The overall assistance of down payment will reduce the borrower's loan amount, in turn reducing their total monthly expenses. If you have the minimum down payment requirement you are eligible to apply for the incentive, which is 5% (or 10% for new builds) of the purchase price through a shared equity program with the Government of Canada.
Borrower Requirements
-You must be a first time home buyer who is a CAD citizen, permanent residence, or a non-permanent residence in Canada who is legally working in Canada
-You must have the minimum down payment requirement of 5%
-Your total income cannot exceed $120,000
*Please note that the mortgage cannot exceed 4x times the qualifying income
How it Works:
The government of Canada will offer 5% of the purchase as down payment for a re-sale home, and 5% or 10% of the purchase as down payment for a newly built home. This amount is not interest bearing nor requires ongoing repayments.
When must I repay my incentive?
-Can repay the incentive at anytime with no penalty
-Must repay in 25 years or at time of sale of property
-Repayment amount is based on 5% (or 10% depending on the original % borrowed) of the market value
Example: How Repayment of Home Buyer Incentive Works
INCREASED VALUE
You purchased a home for $400,000 using the 5% incentive = $20,000.
You now sell your home for $450,000. Your repayment will be 5% of the sale value = $22,500.
DECREASED VALUE
You purchased a pre-sale for $400,000 using the 10% incentive = $40,000.
You now sell your home for $350,000. Your repayment will be 10% of the sale value = $35,000.
*Any repayment before the sale of the home, or before the 25 year period, will be based on the current value of the home at the time of repayment.
Example Scenario:
John is purchasing a re-sale home for $400,000.
John has 5% down payment from his own savings = $20,000
John will also be applying for 5% incentive from the shared equity program = $20,000
The result of the incentive from the shared equity program lowers John's loan amount and reduces his monthly expenses. His monthly payments are reduced by $114/month or $1,368/year.
A few years later, John decides to sell his home for $450,000. John now needs to repay the incentive based on the current value of the home = $22,500.
Effective Dates
September 2, 2019 Applications can be submitted
November 2, 2019 Earliest completion date
*Amount of the incentive is calculated outside of the loan insurance premium *Incentive amount will be registered as a second charge at land title
Any questions? Contact me at jessica.kuan@cleartrust.ca
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