Taking Part In The First Time Home Buyer Incentive

Buying a home

What is the First Time Home Buyer Incentive?

For homebuyers looking to break into the Calgary housing market, the stress test and other changes have made it a challenge. That is in part why the federal government put the First Time Home Buyers Incentive in place. Participants of the program, which kicked off on September 2, will see the funds released as early as November to get them into a home.
The government has invested $1.2 billion into the Incentive, which they hope will run for three years. However, it will close once all of the funds have been allocated.

How Does The Incentive Work?

The loan sharing program contributes 5 to 10% of the home purchase price to qualified applicants. The contribution will lower the overall net price of the mortgage, resulting in lower monthly payments for the buyer. The plan administrators think this will lower payments by $100-$300 a month. The savings makes owning a home much more affordable and means that buyers can qualify for a higher amount.
The Incentive covers three property types: new construction, existing homes, and new or resale mobile homes. With new construction, the government will contribute 5 to 10%. For existing homes and mobile/manufactured homes, the government will contribute 5%. Buyers are not allowed to purchase the house to rent it out. It must be their primary residence.

First Time Home Buyer Incentive qualifications include:

  • You have not purchased a house previously
  • You must have the minimum down payment
  • The purchase must be in Canada
  • It must be your primary residence and not a vacation home
  • In the last four year’s you did not reside in a house owned by you, your spouse or common-law partner
  • You are a Canadian citizen, a legal permanent or non-permanent resident authorized to work in Canada
  • Your household income cannot be over $120,000

Additionally, people who are separating from their spouse or common-law partner would also qualify, even if they do not meet the other incentive requirements.

First Time Home Buyer Incentive
Starting on Sept. 2, 2019 Canadians can now buy a home with government help under the First Time Home Buyer Incentive

How Can I Apply?

Applying is relatively easy. There is an online application that can be filled out. However, the first practical step is to assemble a real estate team. You’ll need to apply for a mortgage pre-approval to see what you qualify for. Then, with the help of a real estate agent, it’s time to shop for a home. Once you find a home you’re ready to make an offer on, then it is recommended you fill in the application forms. As mentioned above, you will still need to come up with a minimum of 5% for the down payment.

At The Mortgage Group, we can assist you with the pre-approval process and filling out the paperwork. Our mortgage brokers in Calgary will help you submit the firms to the government administrator. They will then contact us – or whomever you have help submit the forms – when you are accepted. From here, your real estate lawyer will likely become involved as everything is arranged to close the agreement with the government. They will submit all of the documents, and ensure that the government’s contributions are paid to the mortgage upon confirmation of title transfer and possession date.

Is The First Time Home Buyer Incentive Right For Me?

The money the government is giving is not a grant or free; it is a home equity loan. It is a second mortgage on your property, though it has no regular principal payments, nor is it interest bearing.

The loan over a 25-year duration and you can repay it at any time. If homeowners don’t pay it off before 25 years, or they sell the home, the government takes a cut of 5 to 10% of the fair market value price of the home. The percentage is based on how much they put in initially. If it was 5%, then they will only expect 5% in return. The Incentive cannot be ported onto a new property. If you decide to port the mortgage and move into a new home, you will have to pay off the Incentive.

Any increases to the value of your home are shared with the government at final payout or sale. If housing values go down, the government also takes a loss in the final sale. There can be joint mortgagees, but all parties are then responsible for the loan. There are also ways to refinance the loan without triggering a need to repay the government’s money early.

While the cap may not be enough to put you in your forever home, this can be a great way to get into a starter family home. The Incentive is not ideal for everyone. If you have any questions and want to learn more, give us a call. We would be happy to look through the options with you and help you find the perfect mortgage product.

An Upside To Calgary’s Falling House Prices

Real Estate - Buying a home mortgages

Written by Robson Fletcher · CBC News · 

Based on income and benchmark prices, report finds most people here could afford a single-family home

For nearly five years now, Calgary’s real estate market has been described as slow, flat, listless.

Compared with long-term averages, fewer homes are being bought and sold these days. And those that do sell are often going for well under the asking price.

By one common measure, prices for single-family homes are now about seven per cent lower than they were back in October 2014. When you factor in inflation, the losses are even greater — on paper, at least — for those who bought at the peak, in real-dollar terms.

This is often framed in the media, by real estate agents, and in casual conversation as bad news. And indeed it is, if you are like most Calgarians and own a home. (This city has one of the highest home-ownership rates in the country.) It’s especially bad if you’re currently looking to sell.

But the flip side of the equation is that home ownership — including the idealized detached home with a yard and garage — is attainable for far more people here than in other major cities.

“If you’re a first-time buyer and you want your first home to be a detached house, based on our numbers, you’ll have a better chance of accomplishing that in a market like Calgary,” said Penelope Graham with Zoocasa, a Toronto-based real estate firm.

That’s according to a recent report from the firm, which, based on income data from Statistics Canada and sales data from various real estate boards, estimates that more than 50 per cent of income earners in Calgary could afford a typical, detached home at current prices.

Compare that with Toronto, where only the top 10 per cent of income earners are in the same boat. Or Vancouver, where it’s a mere 2.5 per cent.

So, especially for a first-time buyer in Calgary, the recent real estate news might not seem so bad.

'Seeing Value'

Alim Charania has been working as a mortgage broker for nearly 20 years in Calgary, and while business may have been brisker in the past, he says there’s still plenty of interest from first-time buyers these days.

Many “are seeing value” in the market, he said, which he personally believes is now one of the best for affordability among major cities.

“Pricing-wise, versus the rest of Canada, for a great city to live in? You probably can’t beat it, to be honest,” he said.

Still, many would-be buyers are in no hurry to pull the trigger.

“They’re still scared,” Charania said. “There is still some uncertainty in the market. They don’t know where Alberta’s going to go; they don’t know if this is the bottom. So that’s usually top of mind.”

Looking over the Zoocasa report, he raised an eyebrow at some of its assumptions when it comes to determining what’s affordable. The firm assumed people would be making a 20-per-cent down payment, and paying a 3.75-per-cent mortgage rate over a 30-year amortization.

Charania said most clients he meets aren’t putting that much money down, and the relatively new mortgage “stress-test” rules would require them to prove they could pay a higher interest rate in order to qualify for a loan.

But, all those assumptions being equal across the various markets being compared, he said the report does highlight how much more attainable home ownership is in Calgary compared with other major centres.

“Affordability-wise, definitely we rank quite high, for sure,” he said.

Buyer's Market — If You Can Get A Loan

Lori Grill, an associate with The Mortgage Group Inc., says it remains a “buyer’s market” in Calgary.

And while the decline in house prices over the past several years may be appealing for first-time buyers, in particular, she said home ownership is still unattainable for many Calgarians.

That’s in large part due to the stricter lending rules, but Grill said more and more of her clients seem aware of the new mortgage environment.

“They do come to us saying, ‘Oh, I don’t know if I can qualify,'” she said.

“And some of them are pleasantly surprised and they leave my office feeling quite happy … and then others go, ‘OK, well, I guess I have some work to do. I need to get some credit cards paid off. I didn’t realize that was going to have the impact that it does.'”

The data in the report, Graham noted, is aggregated from real estate boards in each local market and the typical home price is based on the “benchmark” in each region. That means many houses will cost more than that — and many will cost less.

“We don’t want to put out the message that some of these markets are completely unaffordable for everyone,” she said. “There’s always going to be options that are below the average in these markets. So it’s important to keep that in mind — that we’re looking at aggregate data.”