How does the incentive work?
It’s called a “shared equity mortgage”, delivered through the Government of Canada.
The government advances an interest-free loan of up to 5% of the purchase price of an existing home, and up to 10% of the cost of a new home for first-time homebuyers only. This lets first time buyers take out a smaller mortgage, meaning lower monthly payments.
As the borrower, you must have 5% saved for a down payment (for the first $500,000 in lending value and 10% saved for lending value above $600,000) in order to be eligible. You must also repay the loan within 25 years, or when the property is sold.
Your down payment can come from savings, withdrawal from your RRSP or a financial gift from a relative – certain conditions may apply.
Who can apply?
What properties are eligible?
1 to 4 unit residential properties which includes:
What are the repayment terms?
You can repay the incentive at any time without a pre-payment penalty, but the deadline for repayment is 25 years or when the property is sold…whichever is sooner.
The repayment amount is based on the property’s fair market value, which is a bit of a “catch”.Here’s what we mean:
You received a 5% incentive toward the home’s purchase price of $200,000 ($10,000). Your home’s value increased to $300,000 over time. At the time of payback, you owe the government 5% of $300,000 ($15,000) which is the fair market value of your home at repayment time. The government has “shared” in your home’s equity to the tune of $5,000.
Note: If the property value decreases over time, you are still responsible for repaying the shared equity amount based on the property’s current value at repayment time.
What are the other program requirements?
• You must have a household income of less than $120,000. This means your income, and your partner/spouse/co-applicant’s combined income must fall under the threshold.
How do I know if the incentive is for me?
When is the incentive available?
September 2nd, 2019. The government has allocated $1.25 billion over three years for the incentive. Funds each year are available on a first-come, first-served basis.If you want to know some of the finer-print details of the incentive, we’re happy to help or you can check out CMHC’s info page here:
You Dream It. We Finance It.