CMHC introduces mortgage incentive to help first-time homebuyers
A new budget tabled by the Liberal government could turn the tables on home ownership for prospective owners in Canada.
It has become increasingly difficult for would-be homebuyers to purchase their first home in certain markets, most notably in Toronto and Vancouver, the country’s most expensive cities. But a new rebate program seeks to provide prospective homeowners with some much-needed relief.
Known as the First Time Home Buyer Incentive, the CBC reports that the program operates as a shared equity mortgage. It would see the Canadian Mortgage and Housing Corporation (CMHC) assist prospective homebuyers by contributing up to 10 per cent of the purchase price of a new home while also helping to decrease the burden of carrying a mortgage. If purchasing a resale property, the rebate decreases to 5 per cent.
In order to be eligible for the new program, homebuyers must use their own cash for a down payment of at least 5 per cent of the price of the property. Additionally, their total annual household income must not exceed $120,000 and the amount of the insured mortgage would capped at $480,000, or four times the maximum income.
The Liberals have set aside a total of $1.25 billion over three years to set this program in motion. The announcement is a boon for prospective homeowners who have outgrown apartments and other compact living spaces and are ready to purchase their first single-family home. The program will be especially effective in housing markets where home ownership is very restrictive for first-time homebuyers.
The table below shows the total CMHC contributions for resale properties and new builds for total household incomes of up to $120,000.
| Home Price | Maximum Income | Minimum Purchaser Contribution |
CMHC Contribution (Resale) 5% |
CMHC Contribution (New Build) 10% |
Total Mortgage (Resale / New Build) |
|---|---|---|---|---|---|
| $400,000 | $120,000 | $20,000 (5%) | $20,000 | $40,000 | $360,000 / $340,000 |
| $500,000 | $25,000 (5%) | $25,000 | $50,000 | $450,000 / $425,000 | |
| $600,000 | $60,000 (10%) | Does not qualify | $60,000 | $480,000 (New Build) |
In exchange for the rebate, the CMHC would also take an equity stake in the purchased property. Although this would certainly help with the mortgage, the homeowner would be required to pay a bill later on when the property changes hands or is sold.
Scheduled to be implemented this fall, the program will be further developed over the coming months. Additional information will surface as the time of the official launch draws closer.
