3 First Time Homebuyer Programs You May Not Know About
There are several ways to make it easier to get into the real estate market if you are a first time home buyer. In fact, there are 3 essential government backed programs that will help you out. Here they are:
1. First Time Homebuyer Tax Credit
When you purchase a home and file your taxes for that calendar year, you can apply for a FTHB Tax Credit, of up to $1500.
- Additional Information can be found at: Click Here
2. First Time Homebuyer RSP Plan
This is where you can withdraw up to $35,000 of your RSPs to use for down payment on a home. You will not be taxed on these RSPs as long as you replenish the RSP Account within 15 years. You must be a First Time Homebuyer though, and if your client has a spouse/partner who owned a home in the past, or currently owns a home, it’s best to send your client to the link below to answer the questionnaire, to determine in advance if they can utilize this program or not.
3. First Time Homebuyer Incentive
This incentive is intended to help FTHBs reduce their monthly payment, by increasing their down payment.
a) You can request a top-up to your down payment of between 5% (existing homes and builds) and 10% (new builds only). So your homebuyer must have their initial 5% down payment still, and then the government will top-up with an additional 5-10%, bringing their total down payment to between 10-15%. The more down payment you have, the lower your monthly mortgage payment.
b) It is a shared equity program though, so this means that if your property value increases you will owe back more to the government, if your property value decrease you will owe back less. The max is an 8% variance in property value either way. This means that if homebuyer is planning on holding onto a property for an extended period of time, they should count on having to owe the government back more than they originally borrowed, as house prices over time tend to increase. They actually recently introduced the 8% variance, as this wasn’t part of the program before – the government realized that people weren’t participating because they didn’t want to share in all their profits.
c) Where this program is beneficial, is if someone is at their max qualifying ratios and adding on the extra 5% down payment brings them below their ratios, outside of this we don’t really use this program. Since it’s inception I’ve only had 2 clients follow through and utilize the program
d) The qualifying ratios are different with this program – so you tend to qualify for less through this program, than you do if you don’t use this program. The reason for this is because of the way they calculate your eligibility. They take your max purchase price as 4 times the income in the application, and the max application in the income can be $120,000 combined (excluding Toronto/Vancouver).
e) The homebuyer must repay the Incentive after 25 years, or when the property is sold, whichever comes first. The homebuyer can also repay the Incentive in full any time before, without a pre-payment penalty.
f) How do we apply? When a homebuyer tells me they want to use the incentive, I will provide them with a package and a form that we send to the lender, to be approved first. From there the homebuyer will follow the instructions and send the application to FCT for approval.
g) Not all lenders use this program, so it does restrict which lenders we can obtain financing with. For additional information Click Here
If you have any more questions, or want any additional information please feel free to reach out to me!
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