The first thing any prospective home buyer needs to do, is determine whether they can afford to buy the home they want. The first-come, first-served program will see federal funds pick up 5 – 10% of a mortgage depending on the type of property that is being purchased. In all cases, you must meet minimum down payment requirements with traditional sources. By obtaining the Incentive, the borrower may not have to save as much of a Down Payment to be able to afford the payments associated with the mortgage.
There are a few notable conditions to watch out for, which have come under fire since the plan’s March announcement:
- First, to be considered eligible, applicants must not have owned a house in the last four years – exceptions will be made for those in a ‘breakdown’ of marriage or common-law partnership.
- Second, a home buyer’s combined annual household income must be lower than $120,000 before taxes and deductions.
How does the FTHBI Program work?
In exchange for providing the assistance through the FTHBI program, you agree that the Program Administrator will be entitle to share in the upside or downside of the market value of the home at the time of repayment.
Example: Anita wants to buy a new home for $400,000 and has saved the minimum required down payment of $20,000 (5% of the purchase price). Under the First-Time Home Buyer Incentive (FTHBI), Anita can apply to received $40,000 in a shared equity mortgage (10% of the cost of a new construction home) through the program. This lowers the amount Anita needs to borrow and reduces the monthly expenses.
As a result Anita’s mortgage is $228 less a month, or $2,736 a year.
Then years later, Anita sells the home for $420,000. The Incentive will need to be repaid as a percentage of the home’s current value. This would result in Anita repaying 10%, or $42,000 at the time of selling the house.
When does the Incentive have to be repaid?
The Homebuyer will be required to repay the Incentive after 25 years from the date of the purchase of the home, or when the home is sold, whichever comes first. In the event of a sale, the Homebuyer must notify the Program Administrator in advance and seek concurrence as to the market value of the home. In the event of a prepayment, the Incentive may also be repaid in full, by the Homebuyer at any time, subject to the amount being repaid being approved by the Program Administrator.
How do I apply?
Step 1: Learn more about the program: First you need to check if you qualify for the First-time HomeBuyer Incentive. This step will reflect what your maximum purchase price would be and what your savings will be.
Step 2: Choose your Incentive and Apply: Read, print and sign the Information Package together with the Canada’s FTHBI Program Attestation, Consent & Privacy Notice both available on the FTHBI Program website. Take the executed Canada’s FTHBI Program Attestation, Consent & Private Notice with you to your first mortgage broker.
Original article: www.placetocallhome.ca
