The first-time homebuyers’ incentive was an initiative introduced by the Trudeau government to try and make homeownership more affordable for all Canadians. We have covered all the nuanced details in our initial post on the first-time homebuyers’ incentive . In essence, the program provides either 5% or 10% of the purchase price as a shared equity “partnership.” The government effectively puts up 5% or 10% down payment and then owns 5% or 10% of your home. The prospect of getting 5-10% effectively free from the government sounds like a great deal initially.
However, as we also saw in our previous post, the nuances mean that the FTBHI (first-time homebuyers’ incentive) are not great for top housing markets. The reason for this was due to the way the program was initially structured. Maximum household income was $120,000 to qualify for this program. Additionally, the maximum mortgage limit was 4x your household income. Therefore, this program could only be used to help with the purchase of a home around $500k. As people in the Greater Toronto Area know, having that amount of money won’t even by 2,000 sq. ft of land !
The government has recognized these problems and has modified the rules a little bit to accommodate markets like Toronto and Vancouver. Two program streams are now available. The original program remains untouched and is available across Canada. If you live in London, Barrie, or some other smaller city, you can still qualify for the original program. The new stream is very similar to the original one with three key differences:
- The maximum household income went from $120,000 to $150,000.
- A mortgage can now be 5x household income as opposed to 4x before.
- The higher limits are only available for homes in the Greater Toronto Area, the Greater Vancouver Area, and Victoria.
In effect, what these changes mean is that the maximum qualifying home price is now $750,000 as opposed to $500,000 before. For Toronto proper, this still isn’t quite enough to buy the right starter house, but it might be doable if you can find a good deal.
While these improvements certainly make the first-time homebuyers’ incentive better for Toronto residents, unfortunately, it’s still not ideal. The biggest issue is that even the new program again caps the grant based on household income. To qualify for the absolute maximum property price of $750,000, you would need a whopping $150,000 salary. If you are single, that amount is very challenging to obtain. If you are married, it still means you would need to be making $75,000 each.
In 2015, the median household income in Toronto was $65,829 . If your married salaries or single salary is at the median, then the FTHBI will only help you purchase a home worth about $330,000. In the Toronto area, this is near impossible to find. The net effect of the credit is that you have to be reasonably well off in the GTA to take advantage of it. However, if you have a combined $150,000 income, you can probably qualify for a mortgage through other means as well.
With that said, what this credit should get southern Ontario residents thinking about are cities outside of the GTA. Windsor, Barrie, London, Whitby, and Oshawa all have beautiful single-family homes that are well under the maximum limit. If you can find employment in one of these cities, there’s a good chance that you would be able to find a home under $500,000. Windsor has properties under $300,000. It’s still possible to find a home in London for $400-500k. A house at that price would allow you to take advantage of the legacy first-time homebuyers’ incentive program.
While the new rules for the FTHBI are a step in the right direction, they still don’t solve the issue of housing affordability within the GTA. You still need a salary that is more than double the average household income to qualify for the maximum house price. Even if you do have the maximum $150,000 salary, you would still need to be looking at buying a property under $750,000. Unfortunately, in many parts of Toronto, even $750k won’t buy much. You could get a decent condo or a starter home in the suburbs. Even then, you might find that the $750,000 doesn’t buy you as much as you thought.
As always, when looking at these incentives, consult with both a mortgage broker and your real estate professional. They know all the latest rules and the nuances of them. The first-time homebuyers’ incentive is an excellent program from the federal government provided that you can find a home that qualifies.
Toronto-area residents might be better off considering surrounding areas rather than the GTA. This incentive is incredibly powerful in the surrounding regions like Oshawa, London, Hamilton, Burlington, and Windsor. It can mean the difference between getting a mortgage at a low rate or not being able to obtain one at all. In these regions, it is very much possible to find homes under $500,000, and therefore, many of them are eligible for the first-time homebuyers’ incentive. If you were willing to consider one of these smaller cities, a real estate professional would be able to show you homes that would qualify for the incentive. Keep in mind that you would need to be looking at homes that are 4x or less your yearly household income.
You can find more benefits to being a first time home buyer by visiting our page here — https://citadelmortgages.ca/first-time-home-buyer/
If you are interested in buying a new home, get in touch with a mortgage broker to determine what you can realistically afford. They can take a look at your documents and pick the best government programs and incentives for you.
Additionally, a qualified mortgage broker like Citadel Mortgages can work with multiple lenders to get you approved. The best part about the whole process is that it only requires one credit pull. Instead of applying to numerous banks, only to hear the same result, Citadel can apply to multiple financial institutions to ensure you get the approval you deserve!
By using a mortgage agent or mortgage broker from Citadel Mortgages, you will be able to ask all the questions you have and be ensured you get the best advice and mortgage product for your mortgage needs. Contact us here at Citadel Mortgages to become mortgage-free sooner!
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