First-Time Home Buyer Incentive

Understand Canada’s First-Time Home Buyer Incentive, how it reduces mortgage payments, and what to consider before accepting this shared-equity program.

First-Time Home Buyer Incentive



What is the First-Time Home Buyer Incentive?

The First-Time Home Buyer Incentive is a federal shared-equity program that helps eligible Canadians reduce monthly mortgage payments by providing a portion of the home’s purchase price.

Why the First-Time Home Buyer Incentive Matters in Real Estate

Launched by the Government of Canada through CMHC, the First-Time Home Buyer Incentive (FTHBI) aims to improve affordability by contributing 5% or 10% toward a home’s purchase in exchange for an equivalent ownership stake.

Key features:
- 5% for resale homes
- 5% or 10% for new construction
- Must be repaid after 25 years or when the home is sold
- Repayment is based on the home’s current market value

Eligibility criteria include:
- First-time buyer status
- Household income under $120,000 (or $150,000 in select regions)
- Total borrowing amount cannot exceed four times annual income

This incentive lowers monthly mortgage payments without requiring interest payments. However, because the government retains a share of the home’s equity, appreciation or depreciation affects the amount to be repaid.

Buyers should weigh the short-term savings against the long-term equity trade-off and consider how property value changes could impact repayment.

Example of the First-Time Home Buyer Incentive in Action

A buyer receives 10% ($45,000) toward a new home purchase through the FTHBI. Upon selling the home for $550,000, they repay 10% ($55,000) to the government.

Key Takeaways

  • Government shares in home equity.
  • Lowers monthly mortgage payments.
  • Must be repaid based on home’s future value.
  • Eligibility based on income and home price.
  • Ideal for buyers prioritizing lower monthly costs.

Related Terms

Additional Terms

Recourse Loan

A recourse loan is a type of loan where the lender can pursue the borrower’s personal assets, beyond the collateral, in the event of default.. more

Pari Passu

A pari passu clause is a contractual provision ensuring that multiple creditors share equally in repayment priority from the borrower’s assets.. more

Non-Recourse Loan

A non-recourse loan is a type of loan where the lender’s only remedy in case of default is to seize the collateral property; the borrower is not. more

Net Operating Income

Net operating income (NOI) is the total income generated by a property after operating expenses are deducted but before taxes and financing costs.. more

Mechanic's Lien

A mechanic’s lien is a legal claim by a contractor, subcontractor, or supplier for unpaid work or materials provided for a property.. more

Lis Pendens

Lis pendens is a legal notice filed in the land registry indicating that a property is subject to ongoing litigation that may affect its title.. more

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