So, many of us have heard about the First-Time Home Buyer Incentive here in Canada. Admittedly, not a lot of people really know what this incentive actually is. So let's break it down...
1. What is the First-Time Home Buyer Incentive?
The First-Time Home Buyer Incentive is a shared-equity mortgage aimed at middle-class first-time home purchasers, with the goal of lowering monthly mortgage payments without increasing the amount they need to save for a down payment.
2. How does the First-Time Home Buyer Incentive work?
The government puts up 5% of the price of a resale home, or either 5% or 10% of the price of a new constructed home. The incentive is a second mortgage on the title of the property, but no regular payments are required. The loan is interest free and can be repaid at any time without incurring penalties. The loan must be repaid within 25 years or when the home is sold, whichever comes first.
3. Why is it important for Canadians?
Many Canadians continue to struggle with housing affordability and this incentive can help carry the weight of those hefty mortgage payments. The incentive took effect in September 2019, with $1.25 billion in funding earmarked to the program over three years.