Few opt for first-time buyer incentive
February 5, 2020
Less than 3,000 applicants were approved last year for the federal First-Time Home Buyer Incentive (FTHBI) which began September 2, 2019. But the program is not the “flop” that some critics claim, according to Canada Mortgage and Housing Corp. (CMHC).
Sherry Cooper, chief economist at Dominion Lending Centres, called the program a flop, noting that total funding of $55 million was a “less than stellar start given its $1.25 billion three-year target.”
Other critics noted FTHBI was introduced while the federal mortgage stress, which requires all homebuyers to qualify for mortgage rates higher than what is actually available, is still in effect. FTHBI currently caps household income at $120,000 making the maximum eligible mortgage value $480,000, a price some say shuts out detached house buyers in higher-priced markets.
The big knock against the incentive is that the homebuyer must share the eventual equity in the home with the government. The incentive provides a no-interest loan equal to 5 per cent of the down payment on a resale home or 10 per cent on a new home. When the home is sold , the buyer the pays the government back 10 per cent of the current value of the home—not the actual amount of the incentive received. For example, if the home is purchased for $200,000, the buyer receives $20,000. If the value of the home increases to $300,000, the repayment value would be 10 per cent of the current value, or $30,000, when the home is sold. If the value of the home decreases to $150,000, the buyer repays 10 per cent of that value, or $15,000.
Home BUILDER was provided with a regional breakdown of FTHBI applicants. CMHC data shows the largest take-up was in Montreal where 557 out of 654 applications were approved with an average incentive loan of $16,000.
In Greater Toronto, 109 out of 145 applicants were approved for an average loan of $20,000.
Applications were much lower in Metro Vancouver with just 29 of 45 applicants approved for an average incentive loan of $18,000.
The city of Edmonton had the second-highest first-time homebuyer applications approved with 375 buyers receiving an average loan of $24,000.
In a statement to Home BUILDER, a CMHC spokesman noted, “The First-Time Home Buyer Incentive has been available for only four months, during the fall and winter seasons, which are slow for homebuyers. As the busier spring and summer seasons approach, we expect the number of homebuyers who can access the incentive to increase significantly.”