Wondering if you’re ready to become a homeowner? In this post, we cover what you should have prepared before you buy a home.
Reviewing and reflecting, from baby milestones to fitness milestones, has become a popular way to track progress. For babies, mothers take pictures once a month along with a list of accomplishments of their offspring. This can be anywhere from sleeping through the night, to learning how to walk. For fitness, it can be beneficial to take videos that show your progression or take measurements once a month. In our day to day life, we don’t always notice changes. However, when we look back at these pictures, videos, and notes we see a noticeable change. March marks the first six months of the First Time Home buyer Incentive. Looking back at the first six months, we have a better understanding of the program and how well it was received.
What is the First Time Homebuyer Incentive?
The First Time Home buyer Incentive is a program that launched back in September 2019. The goal of the program is to assist those with a low income in affording to buy a home. The program is open to all permanent residents, non-permanent residents, and Canadian citizens. The First Time Home buyer Incentive is shared equity between the buyer and the government through insurance providers. For resale properties, homebuyers can receive up to 5% of the purchase price of the property. Homebuyers can receive up to 10% of the purchase price of a property that is newly built. The program is restricted, however, to a maximum purchase price of $565,000. Homebuyers are also obligated to pay back the incentive when the 25 years are up, or the property is sold.
What we saw in the first 6 months
Looking at the first six months of the First Time Homebuyer Incentive, it appeared to have a slow start. The program had a goal of funding about $1.25 billion in mortgages in the next 3-years. According to data from the first four months shows the program has funded around $51.3-million. This is far off pace from what was originally expected from the program.
The low cap on the maximum purchase price of a home that qualifies for the program makes it hard for many first-time homebuyers to qualify in the first place. Provinces like Ontario and British Columbia have seen less interest in the incentive. Only around 440 homebuyers in Ontario applied to the First Time Home buyers Incentive. The average cost of a house in provinces like Ontario and British Columbia is much higher than the maximum purchase price. The government appears to be reviewing ways to improve the program in higher priced cities.
This situation is much different in Nova Scotia. There is an opportunity for first-time homebuyers in Nova Scotia to take advantage of the incentive. The average cost of a home in Halifax is around $326,000. Many first-time homebuyers can qualify with the program here in Halifax and receive funding. So far only 64 first-time homebuyers in Halifax have applied to this program.
What does it mean to share equity
The First Time Homebuyer Incentive is shared equity between the buyer and the government. This essentially means that homebuyers are “giving up” equity in their home. With rising house prices in major housing markets, many first-time homebuyers have expressed issues with sharing equity in their new home. When the homeowner sells the property, they must repay the value of the shared equity back to the government.
The government has announced there would be modifications to the First Time Homebuyer Incentive. The Prime Minister announced there would be changes to the maximum purchase price for certain cities in Canada. Major cities, like Toronto and Vancouver, would see an increase in the maximum purchase price to $789,000. This would help allow more first-time homebuyers in Toronto, Vancouver, and Victoria to utilize the benefits of the program. The mortgage value and incentive amount could also add up to 5 times their income.
In other parts of the country, homebuyers are only allowed 4 times their income. However, the government hasn’t followed through with the changes he has promised Canadians. There have been no updates on when and whether the updates to the program will be made. Hopefully, looking at the slow progress of the program gives the government a reason to prioritize updating the qualifications of the incentive.
There is hope in Halifax
The First Time Homebuyers Incentive is a program that assists first time home buyers by offering up to 10% to use toward a downpayment on their first home. The CMHC notices the challenges that many low-income families face when looking to find an affordable home purchase. While the program has had a slow start in major cities, where house prices are higher, Halifax is still a great market to leverage the program.
With house prices remaining below the maximum purchase price, and new properties continuing to pop up in the market, the First Time Homebuyer Incentive allows homebuyers the achieve their goal of homeownership. Homeowners using the incentive in Halifax are also more likely to afford a safe, accessible, and affordable home with the help of the First Time Homebuyers Incentive. When looking to see how the program can help you afford your first home, give us a call at Clinton Wilkins Mortgage Team! You can give us a call at 902-482-2770 or get in touch with us here!