The First-Time Home Buyer Incentive (FTHBI) has been modified to improve income qualification, but it\u2019s being lampooned as a cynical ploy for the government to profit off of buyers who have the most trouble getting on the housing ladder.<\/p>\n
The changes, first proposed five months ago, raise maximum household income qualification to $150,000 from $120,000, which raises the mortgage amount to $675,000 on a $722,000 property, but the government\u2019s 5-10% contribution towards the buyer\u2019s down payment must eventually be repaid at its appreciated value.<\/p>\n
\u201cThis mostly seems like the government profiting off homeowner appreciation than much else, primarily because of the restrictive requirement that it be paid in full as a lump sum without any partial payments,\u201d said Laura Martin, COO of Matrix Mortgage Global in Toronto. \u201cAs has been pointed out before, under the CMHC Insured Mortgage Program they would actually be able to qualify for more without the government\u2019s assistance of a 5-10% down payment, which actually eats into their equity appreciation because they have to pay it back in full within 25 years.\u201d<\/p>\n
Martin added that, while the Canadian government is trying in vain to make the country\u2019s most expensive housing markets of Toronto, Vancouver and Victoria affordable to first-time buyers, the FTHBI could still be useful in the preconstruction condominium market.<\/p>\n
\u201cThe best use case for prospective first-time homebuyers is with a preconstruction condo or townhouse purchase, where a 10-15% down payment is required,\u201d she said. \u201cIn this case, the borrowed down payment may be necessary and the real estate asset will appreciate aggressively enough in a three- to five-year period that the borrowed funds could be repaid by refinancing shortly after closing. Preconstruction units have generally appreciated at 20-30% year-over-year for the last 10 years.\u201d<\/p>\n
The incentive was in 2019, but it doesn\u2019t appear to be very popular. Toronto mortgage firm Tribe Financial hasn\u2019t even come across one file that relies on the FTHBI to date, and Frances Hinojosa, the company\u2019s managing partner, isn\u2019t so sure she\u2019d advise clients to use it anyway.<\/p>\n
\u201cMy understanding is when the government came out with this, it was to help consumers with affordability, to provide them a share of the property that would reduce monthly mortgage payments, because by not having to make payments on that 5% they have better monthly cash flow,\u201d she said. \u201cBut when you get into shared ownership, you\u2019re sharing the gain as well, so if the government gives them 5% of the mortgage amount they have to give them 5% of sale price.<\/p>\n
\u201cI wouldn\u2019t blatantly advise my clients against this, but I would first say, \u201cLet\u2019s explore your long-term goals before you consider it.\u2019\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
The First-Time Home Buyer Incentive (FTHBI) has been modified to improve income qualification, but it\u2019s being lampooned as a cynical ploy for the government to profit off of buyers who have the most trouble getting on the housing ladder. The changes, first proposed five months ago, raise maximum household income qualification to $150,000 from $120,000, […]<\/p>\n","protected":false},"author":6,"featured_media":23564,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[4],"tags":[],"acf":[],"_links":{"self":[{"href":"https:\/\/www.canadianrealestatemagazine.ca\/wp-json\/wp\/v2\/posts\/9131"}],"collection":[{"href":"https:\/\/www.canadianrealestatemagazine.ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.canadianrealestatemagazine.ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.canadianrealestatemagazine.ca\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/www.canadianrealestatemagazine.ca\/wp-json\/wp\/v2\/comments?post=9131"}],"version-history":[{"count":1,"href":"https:\/\/www.canadianrealestatemagazine.ca\/wp-json\/wp\/v2\/posts\/9131\/revisions"}],"predecessor-version":[{"id":23563,"href":"https:\/\/www.canadianrealestatemagazine.ca\/wp-json\/wp\/v2\/posts\/9131\/revisions\/23563"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.canadianrealestatemagazine.ca\/wp-json\/wp\/v2\/media\/23564"}],"wp:attachment":[{"href":"https:\/\/www.canadianrealestatemagazine.ca\/wp-json\/wp\/v2\/media?parent=9131"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.canadianrealestatemagazine.ca\/wp-json\/wp\/v2\/categories?post=9131"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.canadianrealestatemagazine.ca\/wp-json\/wp\/v2\/tags?post=9131"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}