What is Canada's First-Time Home Buyer Incentive (2024)

The First-Time Home Buyer Incentive is a Government of Canada program designed to help eligible first-time home buyers by providing additional funds to put toward a down payment:

• An extra 5% of the purchase price for a resale home
• An extra 5% or 10% of the purchase price for a newly constructed home

This is in addition to your required down payment, and is in the form of a shared-equity mortgage with the Government of Canada. The First-Time Home Buyer Incentive reduces the resulting monthly mortgage payments, giving support to first-time homebuyers who qualify as they enter the real estate market.

Visit the CMHC (Canada Mortgage and Housing Corporation) website to learn more about the program.

For first-time buyers who qualify, the government provides 5% or 10% of the price of a home, depending on the type of property.

The incentive is like a second mortgage on your property. Your first mortgage must be greater than 80% of the value of the property and is subject to a mortgage loan insurance premium. It also must be eligible through Canada Guaranty, CMHC or Sagen. The incentive is interest-free, and can be repaid at any time without penalties. However, as a shared-equity mortgage, the amount you repay when your home is sold or after 25 years, whichever is earlier, will be calculated using your original incentive percentage and your home’s current market value.

For example, let’s say you qualified for a 5% incentive on the purchase of a home for $500,000, meaning you received a $25,000 loan from the government. Then:

• If your home is sold for $600,000, or its value increased to $600,000 at the 25-year mark (whichever is earlier), you would have to repay 5% of its current market value, or $30,000.
• If, however, your home’s current market value decreased to $400,000, you would have to repay 5% or $20,000.

Here are some criteria to determine your eligibility for the First-Time Home Buyer Incentive:

• You are a Canadian citizen, permanent resident or non-permanent resident authorized to work in Canada
• Your total annual qualifying income doesn’t exceed $120,000, or $150,000 if you are purchasing property in Toronto, Vancouver or Victoria
• Your total borrowing is no more than 4 times your qualifying income (4.5 times if the home you are purchasing is in Toronto, Vancouver or Victoria)
• You or someone you are purchasing the home with may be considered a first-time home buyer if:
  • You have never purchased a home before
  • You have gone through a breakdown of a marriage or common-law partnership
  • In the last 4 years, you didn’t occupy a home that was owned by you or a spouse or common-law partner
• You meet the minimum down payment requirements with traditional funds such as savings, RRSP withdrawal, or non-repayable financial gift from family

The home you’d like to purchase must be eligible for the First-Time Home Buyer Incentive. The incentive amount can also vary for different property types.

The property must be in Canada and be available for full-time, year-round occupancy. The home cannot be used as an investment property.

The table below shows which types of homes qualify for the incentive, as well as the amounts they are eligible for.

Residential properties can have 1 to 4 units and include:

• single family homes
• semi-detached homes
• duplex
• triplex
• fourplex
• town houses
• condominium units
• mobile homes

• Visit the CMHC website for more information and follow the instructions to fill out the 2 application forms
• Give your lender the completed forms and they will submit the application for you
• If you receive your acceptance, call FNF Canada at 1-(855) 844-4535 to activate your incentive and provide the name of your lawyer/notary (this must be at least 2 weeks prior to your closing date)

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You’ll have to pay back your incentive in full either when your home is sold or after 25 years – whichever happens first.

However, you can also choose to repay your incentive in full earlier, without a prepayment penalty. It’s important to note that your loan is being repaid to CMHC and not your mortgage lender.

The First-Time Home Buyer Incentive must be repaid in full – there is no partial payment. Since the incentive is a shared equity mortgage, meaning the government “shares” in any increase or decrease to the value of your home, you’ll have to pay back the original incentive as a percentage (5% or 10%) of your home’s fair market value at the time of repayment – whether that value has gone up or down. Note that the repayment percentage is limited to a maximum gain or loss equal to 8% per year (not compounded).

As an example, let’s say you originally received a 5% incentive on a home you bought for $500,000, which would mean the government loaned you $25,000. Then:

• If your home is sold for $600,000, or its value increased to $600,000 at the 25-year mark (whichever is earlier), you would have to repay 5% of its current market value, or $30,000.
• If, however, your home’s current market value decreased to $400,000, you would have to repay 5% or $20,000.

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