A Breakdown of the First-Time Home Buyer Incentive Program
October 17, 2019
A Breakdown of the First-Time Home Buyer Incentive Program – Over the past few years, the price of a home in the GTA has increased so rapidly that young people are finding it difficult to purchase a home. The government is trying to make it more affordable by introducing the First-Time Home Buyer Incentive (FTHBI). This program can help home buyers by reducing the monthly payments when purchasing a home.
Before the launch of the FTHBI on Sept. 2, 2019, the Canadian government introduced a first-time home buyer’s tax credit back in 2009. It represents a $5,000 non-refundable income tax credit amount on a qualifying home acquired after January 27, 2009. For an eligible individual, the credit will provide up to $750 in federal tax relief.
Here is an outline as to how the FTHBI works.
Under the FTHBI, the government will help an individual buy a home by providing up to 10% of the purchase price. If the individual is purchasing a resale home the government will offer 5%, and for newly constructed homes the individual can apply for either 5% or 10%. Repayments will be made when the home is sold, or after 25 years, whichever comes first, repayments can also be made sooner.
This funding is called a “shared equity mortgage” so that the government will participate in any appreciation or decline in the value of the home.
If renovations are made and the property increases in value, the individual will provide a portion of the increased value to the government when the FTHBI is repaid.
You purchase a home for $400,000 and receive a 10% incentive ($40,000) under the FTHBI program. If you later sell the home for, $500,000, you will have to repay 10% of your selling price to the government or $50,000 in this case.
To be eligible for the FTHBI, an individual must be meet the following criteria.
- Never purchased a home before;
- Gone through a breakdown of a marriage or common-law partnership; or
- In the past four years, you have not occupied a home that you or your current spouse or common-law partner owned
Along with the above criteria the individual must:
- Income must be $120,000 annually or less,
- Total borrowing (your mortgage plus the incentive) is limited to four times your qualifying income,
- Minimum down payment must be 5% (on the first $500,000 of property value; 10% on the value above $500,000), and your total down payment must be under 20% (so that the mortgage will be insured through either Canada Guaranty Mortgage Insurance Corp., Canada Mortgage and Housing Corp. or Genworth Canada).
Party Platforms & Commitments
The federal election is on October 21st and parties have made commitments regarding the First-Time Home Buyer Incentive and tax credit.
Liberal Party of Canada
Expand the First-Time Home Buyer Incentive to provide more help to communities in the greater Toronto, Vancouver, and Victoria regions by allowing homes valued at up to $789,473 to qualify, up from $505,263. This new program would apply as of November 2019.
New Democratic Party of Canada
Assist people with closing costs by doubling the Home Buyer’s Tax Credit to $1,500. Currently set at $750.
Green Party of Canada
Eliminate the First-Time Home Buyer Incentive.\
* A Breakdown of the First-Time Home Buyer Incentive Program written by Benczik Team Realty
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