The First-Time Home Buyer Incentive (FTHBI) has been highly scrutinized since it was first announced by the federal government in March; the program, which will see the Canada Mortgage and Housing Corporation (CMHC) provide interest-free down payment loans to home buyers in exchange for a share of equity, is considered to have restrictions too strict to really make a mark in Canada’s priciest markets.
The FTHBI, which will go into effect in September of this year, will provide some first-time buyers with 5% toward their purchase of a resale home. To be eligible, buyers must have a combined household income of no more than $120,000, and cannot take out a mortgage more than four times that amount, including the amount provided by the CMHC. They must also qualify for an insured mortgage, which requires them to have at least a 5% down payment saved.
What Does the FTHBI Do?
The FTHBI works by adding an interest-free second mortgage to the home purchase, which only needs to be paid back once the home is sold or the 25-year mortgage amortization matures. It cannot be paid back in installments, though homeowners are able to pay it off early with a lump sum. In exchange for the interest-free loan, the CMHC assumes an equity position in the home’s value, which can increase or decrease depending on market performance.
The loan reduces the size of the mortgage upfront, thereby reducing monthly payments and the amount of interest paid. The CMHC calculates that for a buyer receiving the maximum 10% (allowable on newly-built homes only), they’d save $286 per month, resulting in $3,430 in savings per year.
Home Price Restrictions Too Low for Vancouver Market
However, the FTHBI’s income and mortgage limit maximums mean only a small pool of homes would be eligible; assuming a home buyer has the maximum income allowable and is making a 5% down payment, they would not be able to purchase a home with a price exceeding $505,000 in order to qualify for the FTHBI.
That arguably doesn’t have much traction in a market like Metro Vancouver; benchmark prices for Vancouver homes for sale were $998,700 in June according to the Real Estate Board of Greater Vancouver; benchmark detached houses fetch $1,423,500 while benchmark apartments – likely the only viable entry point to the market for most first-time buyers – sit at $654,700.
Only Apartment Purchasers Eligible in Metro Vancouver
In fact, according to recent calculations by Zoocasa, if you’re looking to purchase a benchmark-priced house in one of 16 Metro Vancouver markets using the FTHBI, you’d be out of luck altogether; there are no options priced low enough to qualify for the program anywhere in the region.
However, for apartment buyers, there are some options available in seven markets, though they remain beyond the downtown core. Here, benchmark apartment prices could potentially qualify for the FTHBI, assuming a home buyer qualifies based on household income of $120,000 and has saved the requisite 5% down payment. Home prices were sourced from the Real Estate Board of Greater Vancouver and the Fraser Valley Real Estate Board for the month of June, 2019.
Markets with qualifying benchmark apartment prices include:
Maple Ridge: $355,200
North Delta: $377,900
Surrey (excluding South Surrey): $416,400
Port Coquitlam: $446,500
Pitt Meadows: $498,400
White Rock / South Surrey: $500,100
Check out the infographics below to see where it’s possible to utilize the FTHBI in Metro Vancouver:
Benchmark home prices were sourced from the Real Estate Board of Greater Vancouver and Fraser Valley Real Estate Board.
It is assumed home buyers have the maximum combined household income of $120,000, and have saved the minimum 5% down payment for a home priced at $505,000.
Zoocasa.com is a real estate website that provides advanced online search tools and data to empower Canadians to buy or sell their homes faster, easier and more successfully. Home buyers can browse real estate listings on the website or the free iOS app.
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Penelope Graham is the Managing Editor at Zoocasa, and has over a decade of experience covering real estate, mortgage, and personal finance topics. Her commentary on the housing market is frequently featured on both national and local media outlets including BNN Bloomberg, CBC, The Toronto Star, National Post, and The Huffington Post. When not keeping an eye on Toronto's hot housing market, she can be found brunching in one of the city's many vibrant neighbourhoods, travelling abroad, or in the dance studio.