The new First Time Home Buyer’s Incentive (FTHBI) came into effect in September 2019. The program is aimed at making it easier for young people/eligible Canadians to buy their first home by lowering the monthly mortgage payments. The federal government agreed to a $1.25 billion CMHC First-Time Homebuyer Incentive over three years. It will provide 5% of the cost of an existing home up to a maximum of $500,000 and 10% of the price of a new home. While it sounds like the federal government is providing an interest-free loan, know that they also secure shared equity in your home as it goes through gains and losses. This means the amount paid back to the government will fluctuate based on how much your home increases or decreases in value.

There are a few notable conditions to watch out for;

• Applicants must have a down payment of at least 5% and no more than 20%. (CMHC insurance must apply)
• Household income must be less than $120,000
• The mortgage cannot be more than four times the homebuyers' household income.

For example, if you buy a $400,000 home with a minimum down payment of 5% ($20,000) you would be eligible to receive $40,000 for a newly constructed home through CMHC. As a result, instead of taking out a $380,000 mortgage, you will borrow $340,000. On a mortgage at 3.5% the monthly savings over the 25-year amortization period is more than $200.

• 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."
• The loan must also be paid back under two circumstances:
  • if you sell your home;
  • or at the end of 25 years

The current mortgage stress tests for both insured and conventional mortgages remain intact, however, as CREA states in their federal budget bulletin, “The government will continue to monitor the effects of its mortgage finance policies and adjust them if economic conditions warrant.”

In addition to the FTHBI the Liberal government also increased the amount first time buyers are allow to withdraw from their RRSP for a down payment. A $10,000 increase in the federal Home Buyers' Plan to allow a maximum withdrawal of $35,000 from one's RRSPs to put towards a down payment on a home. This allowable withdrawal for first-time buyers has also been extended to apply to Canadians after experiencing a marital breakdown in marriage or common-law partnership. The same repayment schedule applies with home buyers required to pay back their RRSPs over 15 years. 

Frequently asked questions about the new incentive:

What properties are eligible?

The new incentive is to help first-time homebuyers/eligible Canadians purchase their first home. Eligible properties include: new construction, re-sale home and mobile/manufactured homes. The residential properties can include up to 4 units. The types of properties include: single family, semi-detached (i.e. side by side), duplex, triplex, fourplex, town houses, and condominium units. The property must be located in Canada and must be suitable and available for full-time, year-round occupancy.

Can I buy a house using the program and rent it out?

No. The incentive is to help first-time homebuyers/eligible Canadians purchase their first home with the intent to live the property. Investment properties are not eligible for the incentive.

What are the terms of repayment?

The homebuyer will be required to pay back the Incentive amount after 25 years or when the property is sold, whichever comes first. The homebuyer can also repay in full at any time, without a penalty. Refinancing of the first mortgage will not trigger repayment.

How is repayment calculated?

• If a buyer receives a 5%, the homebuyer will repay 5% of the home’s value at repayment.
• If a buyer receives a 10%, the homebuyer will repay 10% of the home’s value at repayment.

Repayment is based on the property’s fair market value at the point in time where repayment is required.

Are there other costs involved with the First-Time Homebuyer Incentive?

There may be some additional cost associated with the Incentive:

• Legal fees: Your lawyer is closing two mortgages so you may be charged higher fees.

• Appraisal fees: You may need to have an appraisal done to value determine the fair market value of your home when thinking about repaying the incentive.
• Other fees: Additional fees may be incurred throughout the life cycle of the incentive, like switching your first mortgage to a new lender or refinancing your first mortgage.

What are the mortgage details?

• The maximum threshold for debt service ratios are GDS 39% and TDS 44%. This is only applied on the first mortgage and is subject to requirements by lenders and mortgage loan insurers.
• Total borrowing is limited to 4 times the qualifying income. The combined mortgage and Incentive amount cannot exceed four times the total qualifying income.  The amount for the mortgage loan insurance premium is excluded from this calculation. 
• The Incentive is a second mortgage on the title of the property. There are no regular principal payments. It isn’t interest bearing and has a maximum term of 25 years.  
• The Government of Canada will share in the upside and downside of the property value upon repayment. 

 Is Mortgage Loan Insurance required?

• The mortgage must be eligible for mortgage loan insurance through either CMHC, Genworth, or Canada Guaranty. The first mortgage must be greater than 80% of the value of the property and is subject to a mortgage loan insurance premium.
• The premium is based on the loan-to-value ratio of the first mortgage only. That is, the first mortgage amount divided by the purchase price. The Incentive amount is included with the total down payment.
• Mortgage loan insurance premiums may vary depending on the mortgage loan insurer and may be subject to provincial taxes. 

Can I switch my first mortgage to a different financial institution?

Yes, your first mortgage may be switched to a different financial institution without having to repay the incentive. The terms of the first mortgage may not be altered in this case.

If I decide to purchase a new property, can I port (moving the mortgage to a new property) the Incentive along with my first mortgage?

A Port is considered to be a sale which will trigger repayment of the Incentive.

Do you have a question regarding the new home buyer’s incentive? Feel free to contact me, I’d be glad to answer any of your real estate questions.

#AgentAmy

Amy McDermid

Sales Associate

Phone: (204) 470-5356
Email: Amy@JenniferQueen.com

To decorate or not to decorate? That seems to be the question of the season.  Or at least one that I have encountered enough times that I feel it is blog worthy!

The short and simple answer, YES! Feel free to decorate your home for the holidays.  Here are some of my recommendations for how to get your house on every buyers’ wish list:

The Proper Foundation: Is your home normally clean and tidy?  Would you consider it to be in a “staged state” prior to your decorating?  If so, then adding a few decorations will create a lovely ambiance.  However, if your home is cluttered adding additional nick knacks is a big Ho-No (see what I did there?).

Make it Cozy: I don’t mean jam pack the space so that people can’t easily navigate their way through it.  Remember, less is always more.  BUT the right festive holiday touches can go a long way.  Have some cider simmering on the stove, start a fire (ONLY if you have a fireplace), turn on some flameless candles, leave out some cookies, place a great wreath on the front door – and you’ve created an ambiance that will appeal to any buyer!

Complement Existing Décor:  Are the colours you are decorating your home consistent with the esthetic of the home?  Remember, buyers like consistency.  We do not need to be jarring them with opposing colours or designs throughout the home.

Accentuate the Positive: Done right, holiday décor can be used to dress up the key features of a home.  Do you have a beautiful fireplace?  Then make it stand out as a focal point in a room with beautiful garlands.  Or do you have high ceilings?  Accent that with a large wreath or other décor.

Go Classic with the Lights: Curb appeal is incredibly important as it creates that (hopefully positive) first impression. Stay away from the large cartoonish inflatables or bright flashing lights. They are too distracting and take away from the home itself.  As a side note, I do own an inflatable Christmas Minion that we proudly have in our yard every year.  But I would not put it up if our home was for sale.  Stick to the more classic white/yellow bulbs placed tastefully along the eavestroughs. It adds a look of sophistication and class.

Decorating the Tree: I would advise against getting a wide and bushy tree.  It will make the space feel smaller.  Instead opt for a skinnier version, and similar to the point above about complementing your existing décor, keep the tree décor more consistent as well.  Stick to three colours or less, and no homemade items.  It’s too personal and makes it difficult for the buyer to picture themselves in the home.

A few other points I would like to make for those people that are selling their home this holiday season:

Do your best to keep the home accessible.  I do not expect you to be showing on Christmas Eve or Christmas Day (although it has happened), but try and keep the place as neat and tidy as possible so that it is not such a daunting task to entertain a showing request on December 27.

Competition Dries Up: I have found year-after-year that listings that may have been sitting in December all of a sudden sell through in the three weeks following Christmas.  Why? Because inventory is SO limited at this time of year.  A lot of people seem to take their home off the market during December but that doesn’t mean that buyers stop looking!

Only the Most Serious Buyers: Truthfully.  Who actually wants to look at houses during the holidays?  Only those buyers who seriously need a place.  Whether it be expiring leases or their own home having recently sold or any other combination of unique circumstance, the most serious of buyers are out and looking at this time of year and they tend to be much more decisive and strong in their negotiations.

And finally, DO NOT let selling your home ruin your holiday.  Work with your Realtor to determine blackout dates and even visiting hours that are appropriate for you over the holidays. Quite often they can post the schedule in Realtor Remarks so that other Realtors know when they can and can’t show the property. While it is important to keep the home as accessible as possible, it does not have to be to the detriment of your enjoyment of the holidays. 

Thank you for reading.  I hope you and your family have a wonderful holiday season filled with love, laughter, family, and friends.  And from my family to yours, Merry Christmas!

Jennifer Queen

Tel: (204) 797-7945
Email: Jennifer@JenniferQueen.com