Everything You Need to Know About CMHC’s New Incentives for First-Time Home Buyers
James Harrison, AMP
Breaking into the Canada mortgage market as a first-time homebuyer can be daunting, especially when it comes to navigating incentives, offers, and financial hurdles. Luckily, CMHC’s newest Home Buyer Incentive Plan for 2019 is full of incentives tailored perfectly for first-time homebuyers, the most important of which are broken down below:
Payment for Equity
As part of the latest First-Time Home Buyer Incentive Plan, CMHC will pay 5% of the purchase price for an existing home and up to 10% for the value of a new home as part of a down payment assistance program in exchange for an equity stake. This means that the Government of Canada partners with you in a Shared Equity Mortgage, taking a share of the increase (or decrease!) in the property’s market value. To qualify for this incentive, first-time homebuyers must meet a short set of criteria:
- Minimum down payment amount based on mortgage amount
- Qualifying income is $120,000 or below
- Total mortgage is no greater than four times the qualifying income
- Homes must be below the purchase price of $500,000
The government’s equity stake, otherwise referred to as a Shared Equity Mortgage, is then repaid as a percentage of the selling price, which takes into account the gain or loss in property value.
Taking Advantage of Your Money: RRSP Withdrawals
The Home Buyer’s Plan, a federal program that acts as a first-time homebuyer incentive, allows you to use a $35,000 RRSP withdrawal (in one year) towards your new home purchase. Making your RRSP withdrawal requires you to fill out a Home Buyers Plan Redemption Form to declare the amount that is being withdrawn, whether in a single amount or in installments.
Why First-Time Homebuyer Incentives?
In today’s housing market, it can take individuals years to save up enough for the minimum down payment of 5% on a home. With the help of the First-Time Home Buyer down payment assistance incentive and the RRSP withdrawal allowance, purchasing a home can come much sooner.
These incentives, developed for Canada’s real estate market and the first-time homebuyer, offer a number of benefits that help one transition into home ownership, such as:
- Purchase a home with the future in mind
- Reduce the financial burden without delaying property purchase
- Shared equity mortgage means interest-free down payment assistance
- First-Time Home Buyer Incentive allows choices for repayment based on property value, not interest
- Savings on mortgage payments of up to $3,430 per year
Your first home is one of the biggest, most important purchases of your life. The Government of Canada has developed a system to help first-time homebuyers comfortably acquire and pay back a mortgage, with assistance that is based on property value, rather than an established interest rate. With CMHC’s First-Time Home Buyer Incentive, buying your first home just got much easier.