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First-time Homebuyer Incentive Nixed By Feds

First-time Homebuyer Incentive Nixed by Feds

Canada Mortgage and Housing Corporation is discontinuing the first-time homebuyer incentive.

The deadline for new or resubmitted applications is March 21.

Launched in 2019, the program was meant to help reduce monthly mortgage payments for first-time buyers by having the federal government take on partial ownership of a property.

The government offered an interest-free loan of up to 5% of the purchase price of an existing (resale) home and up to 10% of the cost of a newly constructed home.

Buyers are required to repay the loan in full after 25 years or when the property is sold, whichever comes first. The amount owing is adjusted to reflect how the value of the property has changed. Where the home’s value has appreciated, repayment includes the original loan amount plus a maximum gain of 8% per annum on the incentive amount. Conversely, if the value goes down, the government will shoulder a percentage of the loss.

The program was hampered in part by eligibility issues, including limits to household income and the size of a mortgage the buyer could take on. Buyers’ household income could not exceed $120,000 a year. At the same time, the amount of the insured mortgage plus incentive was capped at four times the buyers’ annual income(s) or up to $480,000. Depending on the size of the down payment, the most expensive home a first-time buyer could purchase under the plan was between $500,000 and $600,000, effectively shutting out many Torontonians given that it’s difficult to find homes in the city in that price range outside of one-bedroom condominium units.

As of the end of 2022, CMHC had committed just $329 million to the program, representing approximately 18,500 applications nationwide. Data for 2023 is currently unavailable.