First time homebuyer credit for Canadians announced
The 2019 federal budget included a new incentive for first time homebuyers in Canada. Under the plan, the Canadian Mortgage Housing Corporation (CMHC) can contribute up to 10% of the cost of a new home.
Called the “First Time Homebuyer Incentive,” this new program is a way of addressing housing affordability, according to the government. Over the next three years, $1.25 billion has been earmarked for this program, amounting to what many experts are calling a shared equity loan.
How the First Time Homebuyer Incentive works - The inventive works more like an interest-free loan. And, repayment will not be required until many years into the future. Applicants must have a household income of less than $120,000, and first time buyers must still come up with the minimum 5% down payment on the property.
The percentage given to the buyer by CMHC would lower the amount needed to borrow. For example, say you buy a house worth $300,000 with a 5% down payment ($15,000). Under this new home buying program, you could get up to $30,000 from CMHC. So, instead of getting a mortgage for $285,000, you would only need a mortgage for $255,000. This would serve the purpose of lowering your monthly mortgage payments by several hundred dollars a month.