What is the First-Time Home Buyer Incentive?
The First-Time Home Buyer Incentive is a Government of Canada program designed to help eligible first-time home buyers by providing additional funds to put toward a down payment. This program offers:
- An extra 5% of the purchase price for a resale home
- An extra 5% or 10% of the purchase price for a newly constructed home
These funds are provided as a shared-equity mortgage with the Government of Canada, reducing your resulting monthly mortgage payments and supporting first-time home buyers as they enter the real estate market.
Visit the CMHC (Canada Mortgage and Housing Corporation) website to learn more about the program.
How Does the First-Time Home Buyer Incentive Work?
For first-time buyers who qualify, the government provides 5% or 10% of the price of a home, depending on the type of property. Here’s how it works:
- The incentive acts as a second mortgage on your property.
- Your first mortgage must be greater than 80% of the property’s value and is subject to a mortgage loan insurance premium.
- The incentive is interest-free and can be repaid at any time without penalties.
- The amount you repay when your home is sold or after 25 years (whichever is earlier) is calculated using your original incentive percentage and your home’s current market value.
For example, if you qualified for a 5% incentive on a home purchased for $500,000, you would receive a $25,000 loan from the government. If your home’s value increases to $600,000, you would repay 5% of the current value, or $30,000. If the value decreases to $400,000, you would repay 5%, or $20,000.
How Do I Qualify for the First-Time Home Buyer Incentive?
To be eligible for the First-Time Home Buyer Incentive, you must meet the following criteria:
- Be a Canadian citizen, permanent resident, or non-permanent resident authorized to work in Canada.
- Have a total annual qualifying income that doesn’t exceed $120,000 (or $150,000 if purchasing in Toronto, Vancouver, or Victoria).
- Your total borrowing must not exceed 4 times your qualifying income (or 4.5 times if purchasing in Toronto, Vancouver, or Victoria).
- Be a first-time home buyer, which means you:
- Have never purchased a home before.
- Have gone through a breakdown of a marriage or common-law partnership.
- Haven’t occupied a home owned by you or your spouse/common-law partner in the last 4 years.
- Meet the minimum down payment requirements with traditional funds (savings, RRSP withdrawal, or a non-repayable financial gift from family).
What Type of Properties Qualify for the First-Time Home Buyer Incentive?
Eligible properties must be located in Canada and be available for full-time, year-round occupancy. The home cannot be used as an investment property. The incentive amounts vary by property type:
| Property Type | Incentive Amount (% of Purchase Price) |
|---|---|
| Newly constructed home | 5% or 10% |
| Existing (resale) home | 5% |
| New and existing mobile/manufactured home | 5% |
Eligible properties include single-family homes, semi-detached homes, duplexes, triplexes, fourplexes, townhouses, condominium units, and mobile homes.
How Do I Apply for the First-Time Home Buyer Incentive?
- Visit the CMHC website for more information and follow the instructions to fill out the two application forms.
- Give your lender the completed forms, and they will submit the application for you.
- If you receive your acceptance, call FNF Canada at 1-855-844-4535 to activate your incentive and provide the name of your lawyer/notary (this must be at least 2 weeks prior to your closing date).
When Do I Need to Repay the Incentive?
You’ll need to repay your incentive in full either when your home is sold or after 25 years, whichever happens first. You can also choose to repay the incentive in full earlier, without a prepayment penalty. Note that your loan is repaid to CMHC, not your mortgage lender.
How Much Do I Need to Repay?
The First-Time Home Buyer Incentive must be repaid in full as a percentage of your home’s fair market value at the time of repayment, whether that value has increased or decreased. The repayment percentage is limited to a maximum gain or loss equal to 8% per year (not compounded).
For example, if you received a 5% incentive on a home purchased for $500,000, resulting in a $25,000 loan:
- If your home’s value increases to $600,000, you would repay 5% of $600,000, or $30,000.
- If your home’s value decreases to $400,000, you would repay 5% of $400,000, or $20,000.