Starting September 2nd, qualifying first-time buyers in the Brampton and surrounding areas will be able to apply for the first-time homebuyer incentive. This is a shared equity program that will reduce your monthly mortgage payments. If you have the minimum 5% down payment required for an insured mortgage, CMHC (Canada Mortgage & Housing Corporation) will provide 5 percent of the cost of an existing home or 10 percent of a new home.
You will be required to pay the incentive back after 25 years or whenever you sell the home. The amount you will need to repay will be based on your home’s fair market value. If your home increases in value as we of course expect it will, CMHC would share in your gain, but will also share in the loss if your home declines in value. As an example, if you received a 5 percent incentive and your $500,000 home increases in value to $650,000, then you are required to repay $32,500. Although likely to never happen but just for example purposes, if the value deceases to $400,000, you’ll repay $20,000. At any time, you can prepay the incentive without penalty
This program is only available if you meet certain conditions. Your household can only be a maximum of $120,000, and your total borrowed amount that includes the incentive can’t be more than four times your household income. This means that with a household income of $120,000, the maximum purchase price you can consider is about $505,000 if you have 5 percent down. Your maximum house price would be approximately $565,000 for a 15 percent down payment.
CMHC’s First-Time Buyer Incentive
| No Incentive | 5% Incentive | 10% Incentive | |
| Purchase Price | $500,000 | $500,000 | $500,000 |
| 5% Down Payment | $25,000 | $25,000 | $25,000 |
| Incentive | $0 | $25,000 | $50,000 |
| Mortgage | $475,000 | $450,000 | $425,000 |
| Mortgage With Mortgage Insurance | $494,000 | $463,950 | $436,900 |
| Monthly Payment | $2,310.04 | $2,169.52 | $2,043.03 |
| Monthly Savings | $140.52 | $267.01 | |
| Yearly Savings | $1,686.24 | $3,204.12 | |
| 25-Year Savings | $42,156 | $80,103 |
For illustrative purposes only. Assumes 25 year amortization, 5 year term, at 2.89%
It’s very important to get advice well before you buy your first home. This may be a great program for you, or it could reduce your purchasing power and not allow you to buy the home that you want. You may also not want to have the government participate in your property’s gain in value.
Will you be a first-time homebuyer in the Brampton and surrounding area this Fall? If so, please get in touch for a detailed analysis of your situation. I will run the numbers and together we can determine if this incentive program is in your best interests. I look forward to hearing from you!
