What to Know About the First-Time Home Buyers Incentive
Details Released Regarding the First-Time Home Buyer Program
To clear up some of the confusion and specify the requirements and guidelines, below are key dates for program role out and points to be aware of:
- The first date purchases are eligible to qualify for the home buyers incentive is September 2nd. The first closings on the program are on November 1st.
- Buyers who purchase property before September 2nd are not eligible for the program, even if the closing happens after September 2nd.
- First-time buyers must have saved at least the minimum 5% down payment.
- To count as a first-time buyer, client or their spouse cannot have owned a property in the last 4 years. Technically they could have owned a home before to qualify for the program, but not within the past 4 years.
- If a person is going through a divorce or ending a common-law relationship they are considered a first-time buyer (in certain cases, even if/when the other first-time Homebuyer requirements are not met).
- Qualifying buyers can get a loan for 5% of the purchase price on an existing home, or 10% if purchasing a new home.
How the program works:
- The loan is paid back when the property is sold or 25 years after the purchase date, whichever comes first.
- The loan is interest-free.
- The Government will share in the equity increase or decrease
- The maximum amount of the mortgage is 4 times the yearly household income. For a couple earning a combined $100K a year, the maximum mortgage amount eligible is $400,000.
- The maximum family income to qualify is $120K. First-time buyers earning more than $120K are not eligible for the program
- The loan amount from the Government is registered as a second mortgage on the title of the property
An example of how the program works is, buying an existing property for $300,000, receiving 5% incentive, $15,000. Property appreciates in value to $400,000 and is sold. The owner has to repay the government 5% of the sale price of the home. In this example, they have to pay back $20,000 to the Government upon the sale of the home (5% of $400K).
Same requirement if the property loses value. Buy for $300,000, receive a 5% loan, $15,000. A property depreciates to $250,000 and is sold. The borrowers owe the government 5% of the sale price of $12,500 (5% of $250K). Less than the original amount they borrow, due to the property value decreasing.
Please contact Ryan at Conexia, who will be happy to help you out with any questions you may have.