CHMC’S First-Time Homebuyer Incentive

Many Canadian homebuyers have difficulty affording a home and obtaining the money they need for their home purchase—especially first-time homebuyers who are often cash-strapped in Canadian cities where average home prices are pretty high. Not only are homebuyers overwhelmed with getting a mortgage, but they also have to cover other expenses like closing costs, fees, mortgage insurance, and taxes. To give first-time homebuyers a hand, the Canadian government has decided to offer 5% and 10% homebuyer incentives via CHMC. In addition, the government set $1.25 billion aside for the cause for the next three years called the First-Time Homebuyer Incentive. The program has been available as of September 2019, and it is envisioned to help roughly 100,000 Canadian homebuyers. There are a few conditions to be met, and here is what you need to qualify for the First-Time Homebuyer Incentive in GTA:

• Income of $150,000 or less
• provide a 5% down payment (which is anyways the required minimum),
• the mortgage amount, including CHMC's participation, should not exceed $675,000 (if you count in the down payment, it simply means that homebuyers cannot apply if the home's price is over $710,000),
• you get 5% if you are buying a resale,
• you get 10% if you are buying new construction

Do You Have To Pay It Back?

The money received from the incentive is interest-free, but if you decide to sell the home one day, you will have to pay the CHMC back. The repayment policy is based on percentage, which means that if the home increases in value, the CHMC will get more than they initially invested, but they will also get less if the home's value depreciates with time.

The CHMC retains the right to a 5% or 10% ownership depending on how much they invested (i.e., depending on whether you buy resale or new construction), and they will be entitled to a 5% or 10% share in case of a sale.

Let's illustrate with an example:

Let's say you want to buy a $450,000 resale home, and you put down a 5% deposit (which is $22,500), and in need of a cash boost, you apply for the CHMC incentive. The CHMC finds you eligible and adds another 5% to help you out. In exchange, the CHMC gets a 5% ownership in the home. If the value of the home climbs to $500,000 over the years, and you decide to sell, you would have to give the CHMC 5% from the sale, which would equal $25,000 ($2,500 more than they initially invested). This may be a bit tricky for some homebuyers, but according to some experts, the CHMC saves you decent money by taking over 5% of your mortgage load. You would spend far more over the years in interest by taking out a 5% higher mortgage.

Is It Relevant In The GTA?

When it comes to the GTA, some consider that the incentive is not high enough to cover the average housing prices in Toronto. However, CHMC disagrees, reasoning that starter home prices are still under $700,000 even in Toronto. You can find two-bedroom condos, townhomes, or semi's in that price range.  As a result, opinions will probably remain divided; some homebuyers will think it's a great idea, others won't.

To be sure what the right move is for you, and if the First-time Homebuyer Incentives would pay off for you personally, sit down with Manoj and discuss your options. Consider the risks, the benefits, and your current financial standing. If you need additional information or help, feel free to contact me at 647-276-5100.