What is the First Time Home Buyer Incentive?

Mar 31

When you buy your first home in Ottawa, you’re actually eligible for something called a First Time Home Buyers Incentive.

This incentive from the government is meant to inspire more people to buy their first home - and make it easier to do so!

The first time home buyers incentive offers:

5-10% on a newly constructed home
5% on a resale home
5% on a mobile/manufactured home

In the form of a “shared equity mortgage” with the government.

A shared equity mortgage means you share equity of a property with your lender, which in this case, is the government. They help pay for a portion of your mortgage, making your payments smaller, but they also take any profits or losses when you eventually sell the property.

A shared equity mortgage provides the advantage of affordability both in terms of your downpayment and your monthly payments for the years after that. The government wants to encourage people to invest in property and is willing to assist them to do so.

In Ontario, you will have to repay this incentive - 5 or 10% of the property’s CURRENT value (not what it was when you bought it) - within 25 years or when you sell the home, whatever comes first.

Here is how it works:

You receive 5-10% of your home’s purchase price and have to pay this amount back to the government within 25 years. When you pay it back, it will be according to your home’s current value. So, if your home’s value rises by $100,000, you will be paying back an extra $5,000 on top of what they paid you!

This incentive allows homebuyers to buy a home with a smaller downpayment, making it easier for the general public to afford a home.

You are considered a first time home buyer if you:

Have never purchased a home before
Do not currently occupy a home that your spouse or common-law partner owned in the last 4 years
You have recently been divorced, separated, or left a common-law partnership (even if you don’t meet the other requirements)

You are only eligible if:

Your total income doesn’t exceed $120,000 (or $150,000 if you live in Toronto, Vancouver, or Victoria)
Your total borrowed amount is less than 4x your income (4.5x in those same cities listed above)
You are a first time home buyer as defined above
You are a Canadian citizen, permanent resident, or are authorized to work in Canada
You meet the minimum down payment requirements with traditional funds or a financial gift from family

What properties are eligible?

Single-family homes
Semi-detached homes
Duplexes
Triplexes
Fourplexes
Townhomes
Condos
Mobile Homes
Cannot be an investment property

Other things to note:

You may be charged extra lawyer fees as you will essentially be doing two mortgages
You may need to pay to have your home appraised when you repay the incentive down the line

Get in touch with one of our agents for more details, and we can help refer you to the right lenders for the job.