Canada FTHB Incentive Eligibility Requirement and Incentive Amount

The First-Time Home Buyer Incentive helps reduce the monthly mortgage payments for eligible first-time buyers without adding to their financial burdens. By participating in this program, homebuyers may find it easier to afford homeownership, as the larger down payment facilitated by the incentive leads to lower monthly mortgage payments.

Understand What is Canada’s First-Time Home Buyer Incentive (FTHBI)

FTHB Incentive Eligibility

The eligibility criteria for the First-Time Home Buyer Incentive (FTHBI) in Canada are set to ensure that the program serves those who are buying their first home and have a certain level of financial need. Here’s a breakdown of the eligibility requirements:

First-Time Homebuyer Status

• The incentive is aimed at first-time homebuyers. This designation helps to ensure that the program supports individuals or families who have not owned a home before, thus promoting homeownership among new buyers.

Income Limit

• The program stipulates an income limit of $120,000 or less for the participants. This income cap is set to ensure that the incentive benefits individuals or families with a moderate income who might find it challenging to afford homeownership without financial assistance.

Mortgage and Incentive Amount Limit

• The combined total of the participant’s insured mortgage and the incentive amount cannot exceed four times their qualified annual income. This rule helps to ensure that participants do not take on more debt than they can reasonably manage, promoting responsible borrowing and reducing the risk of financial hardship.
• For example, if a participant has a qualified annual income of $100,000, the sum of their insured mortgage and the incentive amount cannot exceed $400,000.

The eligibility criteria are designed to target the financial assistance provided by the FTHBI towards those first-time homebuyers who are in the most need and to promote responsible borrowing and homeownership sustainability. Through these criteria, the program aims to provide meaningful support to individuals and families while also managing the financial risk involved in homeownership.

How Much is Incentive Amount?

The incentive amount under the First-Time Home Buyer Incentive (FTHBI) in Canada is determined based on the value of the purchased property. It varies slightly depending on whether the home is newly constructed or a resale. Here’s a detailed explanation:

For purchasing an existing or resale home, the incentive amount is set at 5% of the property’s value. This contribution can significantly help in reducing the monthly mortgage payments.

For the purchase of a newly constructed home, buyers can choose an incentive amount of either 5% or 10% of the property’s value. The higher incentive for new homes is likely aimed at encouraging the purchase of newly built properties, which can also stimulate the housing market.

• Mobile/Manufactured Homes:

Like existing homes, the incentive for new or resale mobile or manufactured homes is 5% of the property’s value.

The FTHBI is structured as a shared-equity mortgage, meaning the government shares in the appreciation or depreciation of the property value. This shared equity aspect impacts the amount repaid when the property is sold or at the end of 25 years, whichever comes first.

The incentive amounts are interest-free, and they aim to reduce the monthly mortgage payments for first-time homebuyers, thereby making homeownership more affordable without imposing an additional financial burden in terms of interest payments.​

How to Repay the Incentive?

Repaying the First-Time Home Buyer Incentive (FTHBI) involves a few key steps and considerations, given its shared-equity mortgage structure. Here’s a breakdown of the repayment process:

Repayment Timeline

The incentive is an interest-free loan that must be repaid when the property is sold or within 25 years of purchase, whichever comes first.

Repayment Amount

The amount to be repaid is based on the current value of the property at the time of repayment and not the original incentive amount received. This is due to the shared-equity nature of the incentive.

Shared-Equity Mortgage

The government shares in the appreciation or depreciation of the property value. Specifically, the government shares in both the upside and downside of the property value, up to a maximum gain or loss equal to 8% per annum (not compounded) on the incentive amount from the date of advance to the time of repayment.

For instance, if the value of your home has increased by 20% at the time of repayment, you’ll owe 20% more on the incentive amount. Conversely, if the value has decreased by 20%, you’ll owe 20% less.

Evaluation of Property Value

When it’s time to repay the incentive, the current value of the property will need to be determined, usually through an appraisal, to calculate the repayment amount based on the property’s appreciation or depreciation.

Combining with Other Programs

The FTHBI can be combined with other federal programs like the Home Buyers’ Plan, which allows individuals to withdraw amounts from Registered Retirement Savings Plans (RRSPs) to buy or build a qualifying home.

The design of the repayment structure aims to ensure that the government shares in both the benefits and risks associated with property ownership while ensuring that the repayment terms are clear and manageable for the homebuyer.

How Can You Apply for FTHB Incentive?

Applying for the First-Time Home Buyer Incentive (FTHBI) in Canada involves a few important steps:

• Pre-Approval for a Mortgage:

Before applying for the incentive, you need to get pre-approved for a mortgage. This step is crucial as it establishes your eligibility and the maximum amount you can afford to borrow based on your financial situation.

Once pre-approved, the next step is to find a home that suits your needs and falls within your budget.

• Filling out Required Forms:

After finding a home, complete the “Shared Equity Mortgage Information Package” and the “Shared Equity Mortgage Attestation and Consent Form.” These forms are crucial for the application process of the FTHBI.

Your lender will submit these forms on your behalf. It’s advisable to discuss the matter with your lender to ensure all necessary steps are taken accurately.

Upon approval, you are required to call FNF Canada at least two weeks before your closing date to activate the incentive​