A shared equity mortgage is where the government shares in the upside and downside of the value of your property. This incentive is launching on September 2, 2019.
The First-Time Home Buyer Incentive (the Incentive) helps qualified first-time homebuyers reduce their monthly mortgage carrying costs without adding to their financial burdens.
HOW DOES IT WORK?
The incentive enables first-time homebuyers to reduce their monthly mortgage payment without increasing their downpayment. The Incentive is not interest bearing and does not require ongoing repayments.
Through the First-time Home Buyers Incentive, the Government of Canada will offer:
A. 5% for a first-time buyer’s purchase of a re-sale home.
B. 5% or 10% for a first-time buyer’s purchase of a new construction.
HOW DO I KNOW HOW MUCH I HAVE TO PAY BACK?
You can repay the Incentive at any time without a pre-payment penalty. You have to repay the incentive after 25 years or if the property is sold. The repayment of the Incentive is based on the property’s fair market value:
- You receive a 5% incentive of the home’s purchase price of $200,000, or $10,000. If your home value increases to $300,000 your payback would be 5% of the current value or $15,000
- Your receive 10% incentive of the home’s purchase price of $200,000, or $20,000 and your home value decreases to $150,000, your repayment value will be 10% of the current value or $15,000.
NOTE: If your property value goes down, you are still responsible for repaying the shared equity mortgage based on the current home value at time of repayment.
INCENTIVE BY PROPERTY TYPE
|PROPERTY TYPE||INCENTIVE (%)|
|New Construction||5% or 10%|
|New or Re-Sale mobile/manufactured home||5%|
The total amount of funding will be $1.25 billion over 3 years.
The program is expected to be ready to receive Incentive applications starting September 2, 2019. If approved for the Incentive, the purchase transaction must close on or after November 1, 2019. Purchase transactions already closed prior to September 2, 2019 cannot be considered under the program. More details on how to apply will be shared once it is available.
WHO IS ELIGIBLE?
You need to have a minimum down payment to be eligible. You can then apply for a 5% or 10% shared equity mortgage with the Government of Canada. Your maximum qualifying income is no more than $120,000 and your total borrowing is limited to 4 times the qualifying income.
Curious about a Shared Equity Mortgage and If it is right for you? Contact Barb Pinsent from Mortgages By Barb on 780-370-1490 and get all your questions answered.
*Source: National Housing Strategy, Government of Canada.