What Is The New CMHC First-Time Home Buyer Incentive?

What Is The New CMHC First-Time Home Buyer Incentive?

Written by Lisa Rennie
Fact-checked by Caitlin Wood
Last Updated June 20, 2022

Depending on where you live, the price of homes could be extremely high and often out of reach, especially for first-time home buyers. Young adults are often burdened by student debt and have yet to accumulate the type of wealth that older Canadians have. 

Not only that, but young adulthood is when careers are just starting off and entry-level salaries are being earned, which is often not enough to help them save up for a sizeable down payment in a relatively short period of time. 

But, as out-of-reach, as you think buying a home is, it doesn’t have to be. This is especially true thanks to the various programs designed to help Canadians realize their dreams of homeownership. 

One such program is the First-Time Home Buyer Incentive issued by the CMHC. But what exactly is this program all about, and how can it help you get into the real estate market more easily?

What Is The First-Time Home Buyer Incentive?

The First-Time Home Buyer Incentive is a shared-equity mortgage with the Government of Canada. Shared equity loans mean the government will share in either the profit or loss when the home is sold. 

Without having to come up with a bigger down payment, buyers can obtain the funds to cut down on the overall loan amount to make it easier to secure a loan and reduce loan-to-value ratios. In turn, this will translate into smaller monthly payments, which can help free up more money to be spent elsewhere rather than having to dedicate a larger portion of income toward a mortgage.

How Much Can You Get Through The First-Time Home Buyer Incentive?

Officially in effect as of September 2, 2019, the First-Time Home Buyer Incentive (FTHBI) was developed to help ease the pressures of mortgage costs for first-time buyers. The FTHBI provides:

  • 5% or 10% for a first-time buyer’s purchase of a newly constructed home
  • 5% for a first-time buyer’s purchase of a resale (existing) home
  • 5% for a first-time buyer’s purchase of a new or resale mobile/manufactured home

How Does The First-Time Home Buyer Incentive Work?

The borrower is loaned either 5% or 10% of the value of the house, from the government. This money goes toward the down payment. No interest is charged on money but the amount that must be repaid is based on the market value of the home at the time of repayment equal to the percentage that was originally borrowed. 

The funds must be fully repaid by the time the first insured mortgage reaches 25 years or the house is sold, whichever of the two occurs first. Should homeowners be able to save up enough to pay back the amount early before either one of the two scenarios occurs, no prepayment penalty will be charged. 

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What Are The Qualification Requirements For The FTHBI?

In order to be eligible for the new FTHBI, certain criteria must be met first, including the following:

  • One owner must be a first-time homebuyer and not have ever owned property or lived in one owned by their spouse over the previous four years, except in the event of a dissolved marriage. 
  • A 5% minimum down payment is needed.
  • Only insured mortgages qualify, which means down payments cannot be more than 20% of the purchase price.
  • The combined household income must not be greater than $120,000, which includes any income generated by co-signers or rent collected from tenants.
  • The mortgage amount must be less than $500,000.
  • The mortgage-to-income ratio cannot be any more than four times the household income, including any part covered by the FTHBI – this translates into no more than 14.99% for an existing resale home and 9.99% for new home construction.

Types Of Houses Eligible For The First-Time Home Buyer Incentive

To be eligible for the First-Time Home Buyer Incentive, the house you wish to purchase must be located in Canada and be your main residence (i.e. you’re able to live there all year). Investment properties are not eligible.

Eligible properties can have1 to 4 units:

  • single-family homes
  • semi-detached homes
  • duplex
  • triplex
  • fourplex
  • townhouses
  • condominium units
  • mobile homes

How Do You Pay Back The First-Time Home Buyer Incentive?

Under the FTHBI, the borrower must repay a percentage of up to 8% of the home’s current value. For example, let’s say you borrowed 8% ($40,000) of a $500,000 house through the FTHBI, and then decide to sell the house 5 years later for $550,000. You’ll have to repay 8% or $44,000 when you sell your home. 

How Much Do You Have To Repay If Your Home Depecriates In Value?

Using the same example as above, let’s say you decide to sell your house for $450,000. In that case, you’ll have to repay $36,000 instead of the $40,000 you borrowed. 

When Must The First Time Home Buyer Incentive Be Repaid? 

The FTHBI must be paid back in full after 25 years or when you sell your home (whichever comes first). Repayment may also be required if you 

How Do You Apply For The First-Time Home Buyer Incentive? 

Before applying for the First-Time Home Buyer Incentive, you must be pre-approved for a mortgage. You should also have found the home you’re looking to purchase. Once you do, you can apply for the FTHBI by following these steps: 

  • Step 1. Print and sign the forms: SEM Information Package and SEM Attestation and Consent Form. 
  • Step 2. Take the signed documents and give them to your lender. They will apply for the program on your behalf. 
  • Step 3. Your lender will reach out to you if you’ve been approved for the FTHBI. If approved, be sure to call 1-(855) 844-4535 or email FTHBI@FNF.ca and provide them with the name of your lawyer/notary. This information must be provided at least two weeks prior to closing. 

First-Time Home Buyer Incentive FAQs

What is the difference between the FTHBI and the RRSP Home Buyers Plan (HBP)?

While the First-Time Home Buyer Incentive (FTHBI) is a shared-equity mortgage with the government, the Home Buyer’s Plan (HBP) is a program that allows you to use your RRSP funds to purchase a home or even build one. 

Do I qualify for a reimbursement if I’ve already repaid the FTHB incentive? 

If you’ve already repaid your FTHBI, you may be eligible for reimbursement. The Government of Canada is limiting the repayment share to 8% per annum. That means if you repaid more than 8% per annum, you may be eligible for reimbursement. 

What is the maximum income restriction to qualify for the First-Time Home Buyer incentive? 

To qualify for the FTHBI, applicants must have an annual income of no more than $120,000 and $150,000 in Vancouver, Toronto or Victoria.  

Bottom Line

It can be tough to gather the funds needed for a down payment and all the closing costs that come with buying a home. But programs such as the First-Time Home Buyer Incentive (FTHBI) can help make homeownership a reality for many Canadians.

Rating of 5/5 based on 2 votes.

Lisa has been working as a personal finance writer for more than a decade, creating unique content that helps to educate Canadian consumers in the realms of real estate, mortgages, investing and financial health. For years, she held her real estate license in Toronto, Ontario before giving it up to pursue writing within this realm and related niches. Lisa is very serious about smart money management and helping others do the same.

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