Getting your first home is a huge financial decision, and as such, finding ways to fund your investment is crucial. Finding the deposit, qualifying for a mortgage, and making consistent monthly payments are all critical aspects to consider. Fortunately, qualifying for a first-time home buyer loan can relieve some of your stress and help you purchase your first home.

What is a First-Time Home Buyer Loan?

A first-time home buyer loan is an incentive by the Government of Canada. Through a shared-equity mortgage, first-time homebuyers qualify for tax-free loans and tax rebates. The federal government launched the program under the First-Time Home Buyer Incentive (FTHBI).

Are You Eligible for a First-Time Home Buyer Loan?

Not everyone is eligible under the FTHBI. You must be a first-time homebuyer who’s never owned a home or owned a home with a spouse or common-law partner but not lived in the house for the past four years. Also, if you have gone through a divorce or broken from a common-law partnership, you may qualify for a first-time home buyer loan.

After passing the above qualifications, you have more considerations. Your wages, investments, and rental income collectively should be lower than $120,000. Note that you can only borrow quadruple this amount, which caps the loan at $480,000.

FTHBI only applies to homes with mortgage default insurance. This insurance applies to all homes where the homebuyer puts a down payment lower than 20%, which is the maximum down payment allowed for homes under first-time home buyer loans.

Why Is It Called a Shared-Equity Mortgage?

In a typical mortgage plan, when you make a down payment for a home, you become the owner of the equity. However, under the FTHBI, the Government of Canada becomes part-owner, and as such, suffers losses and enjoys profits on your home. Usually, the government loans you:

• 5% of the home’s price for a house on resale
• 10% of the home’s price for a new home

What Are the Benefits?

You can save on immediate payments for the down payment and mortgage insurance.

You don’t have to make monthly payments on the loan or pay interest on the loan. However, you have to pay back the loan in 25 years, or if you re-sell your home, whichever event comes first. Unfortunately, the loan repayment is based on the fair market value of the home at the time of repayment or resale. You can pay more or less than you borrowed, depending on the market.

Should I Take a First-Time Home Buyer Loan?

Contacting your mortgage broker can help you determine if you are eligible for a first-time home buyer loan. If you do, your mortgage broker from Dominion Lending Centres can help you weigh the benefits and disadvantages. Contact us today to get started on your journey to home ownership.