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First Time Home Buyer Incentive: Everything You Need To Know

This initiative by the Canadian government aims to aid first-time homebuyers in the competitive real estate market.

In this blog post, we will explore the details of Ontario’s First-Time Home Buyer Incentive and how it can help you take the first steps toward owning your dream home.

What is the First Time Home Buyer Incentive?

On average, a home in Ontario costs upwards of between $800,000 to $900,000. According to Zolo’s October 2023 real estate trends, the average house price is $1,162,828 in Toronto. It’s become challenging for many first-time homeowners to buy their first property.

Increasing real estate costs, inflation, and interest rates have created more barriers to entering the housing market. To help combat rising costs, FTHBI was created to help people on their buying journey.

This incentive helps first-time get access to funding to purchase a home without additional upfront or monthly cost. Participants must meet insured mortgage down payment requirements. It’s available for annual incomes of $120,000 or less. The incentive and insured mortgage can’t exceed four times the annual income of those involved.

Home buyers who qualify for an FTHBI loan will receive one of the following:
• 5% of the purchase price of an existing home.
• 5% or 10% of the purchase price for a new construction home.
• 5% of the purchase price for a new or resold manufactured or mobile home.

Features of the First Time Home Buyer Incentive

  • Shared equity: Under this program, the government provides a shared equity mortgage, which means they’ll contribute a portion of the home’s purchase price. The specific amount is determined based on the buyer’s income and the property’s price. The incentive can cover up to 10% of the purchase price for existing homes and up to 5% for newly constructed properties.
  • No monthly payments: No monthly payments are required for the program. The shared equity mortgage is repaid after 25 years or upon the home’s sale, reducing the financial burden on first-time buyers.
  • No interest on the government loan: The government’s shared equity portion is interest-free, meaning no extra costs on the incentive amount.
  • Eligibility requirements: To qualify, there are several requirements, such as being a first-time homebuyer, having a household income below a specific threshold, and securing a mortgage from an authorized lender. The property must also meet specific criteria.

Benefits for First Time Home Buyer Incentive

There are countless benefits to the program to assist new homeowners with being successful on their journey. Here are the top four reasons why this incentive supports Canadians:

  1. Reduced financial stress: The program assists in lowering the down payment amount, making homeownership more attainable for first-time buyers. This means you can conserve your savings for other essential expenses.
  2. Decreased monthly mortgage payments: With the shared equity mortgage, first-time buyers can enter the market with reduced monthly mortgage payments.
  3. Increased housing options: The incentive broadens your options for choosing a home. You can consider properties that were previously out of your financial reach.
  4. Financial security: Shared equity lets homeowners build equity without immediate repayment pressure. They only repay the government when selling the property or after 25 years.

How the First Time Home Buyer Incentive works

Let’s use a hypothetical scenario to illustrate how Ontario’s First-Time Home Buyer Incentive can be used.

 Sarah is a 30-year-old professional who lives and works in Toronto, Ontario. She has been renting an apartment for several years and desires to own her home in the city. The high real estate prices and the need for a sizable down payment have been significant obstacles for her.

Fortunately, she discovered Ontario’s First-Time Home Buyer Incentive, which could help her become a homeowner. She would then follow the following steps:

Step 1: Check eligibility

The first thing Sarah does is to check her eligibility for the FTHBI. She meets the criteria as a first-time homebuyer with a household income within the defined limits. This is the first hurdle she successfully clears.

Step 2: Financial assessment

Sarah also realizes that more than her savings are needed for a conventional down payment on a Toronto property. With the FTHBI, she can receive a shared equity mortgage from the government, covering up to 5% of the purchase price of a newly constructed home.

Step 3: Property search

With the knowledge that she has the support of the FTHBI, Sarah starts her house-hunting journey. She explores various new developments in Toronto and falls in love with a condo that meets her needs and budget. The condo is listed at $450,000, and Sarah has $22,500 (5% of the purchase price) covered by the government.

Step 4: Mortgage approval

Sarah applies for a mortgage from a recognized lender, and with the assistance of her financial advisor, she successfully secures a mortgage to cover the remaining 95% of the purchase price.

Step 5: Closing the deal

Sarah’s offer on the condo is accepted, and she proceeds to complete the purchase. She uses her mortgage for 95% of the property value and the FTHBI shared equity mortgage for the remaining 5%. She finalizes home insurance on the property. There will likely be the need for a home inspection to ensure the home is up to standard.

Step 6: Repayment plan

Sarah enjoys living in her new condo without the immediate financial strain of a large down payment. She is aware that she’ll need to repay the government’s 5% shared equity mortgage, but there’s no need for monthly payments. The repayment can be deferred until she decides to sell the property or until 25 years have passed.

Step 7: Build equity

Over the years, Sarah continues to build equity in her condo as property values in Toronto appreciate. She enjoys the benefits of homeownership, which include building wealth and having a stable place to live.

Step 8: Selling the property

After a few years, Sarah’s circumstances change, and she decides to sell her condo. She sells it for a higher price, thanks to the Toronto real estate market’s growth. At this point, she repays the government’s 5% shared equity mortgage using the proceeds from the sale, without incurring any additional interest charges.

Sarah used Ontario’s First-Time Home Buyer Incentive to enter the Toronto real estate market. The program reduced the initial financial burden, making her dream of homeownership a reality. It’s important to note that the credit must be claimed within the year of purchase after buying your first home.

Who qualifies for the First Time Home Buyer Incentive?

To be eligible for the First Time Home Buyers’ Tax Credit, your home must meet the following requirements:

  • The borrower must be a first-time homebuyer within Canada.
  • The borrower’s household income must be below $120,000.
  • The maximum household income of $120,000 (average price of a home $500k-$600k) caps the mortgage at four times that amount ($480k).
  • It can be a single, semi-detached, mobile home, condo, or apartment. It can be a new home or an existing home. It can include a share in a cooperative housing corporation that gives you house possession.
  • Proper documentation of the property.
  • You must intend to occupy the home within one year of purchase.
  • You or your spouse must purchase a qualifying home and be registered in your or your spouse’s name.
  • You must not have owned or lived in a home owned by your spouse in the past four years.


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