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

• Shared Equity
• Down Payment Assistance Programs
• CMHC
• Affordability Programs
• Mortgage Qualification