First-time home buyer incentive

The Federal 2019 Budget announced a First-Time Home Buyer Incentive.

Under the Incentive, Canada Mortgage and Housing Corporation (CMHC) will fund up to 10% of a first-time home buyer's purchase via a shared-equity mortgage (SEM).  The Incentive amount is up to $40,000 (10%) for a new home or $20,000 (5%) for an existing home.

The incentive would be repaid when the home is sold, or in 25 years, whichever is first, but could be repaid earlier if desired.  The Incentive program will launch on September 2, 2019.  No legislation has been provided yet, so the details have yet to be worked out.

When the CMHC incentive is repaid, the amount to be repaid will be the amount of the CMHC equity in the home.  So if it was a 10% incentive, they will be repaid 10% of the proceeds of sale.  If a 10% incentive was $40,000 and the home which cost $400,000 is sold for $600,000, then $60,000 will be repaid.  If the home is sold for $360,000, then only $36,000 will be repaid.

The incentive is only available when first-time homebuyers purchase their first home with the intent to occupy the property.

Be aware that if an existing home is purchased, and the home owner then puts a lot of money into renovations to the home, CMHC will participate in any increase in value that results from the renovations.

Also important to note regarding deemed dispositions, meaning a change of usage when a property is converted from a personal use to a rental: a change in occupancy does not trigger repayment of the Incentive.  However, the intent of the program is to help first time homebuyers purchase their first home with the intent to occupy the property.  Additional events throughout the life of the Incentive may trigger repayment such as default under the first insured mortgage or misrepresentation for eligibility under the FTHBI Program.

For extensive details about the incentive, and a self-assessment tool to determine your eligibility, see First-Time Home Buyer Incentive on the CMHC website.