Tax Tips & Traps: First-time Home Buyers

The current housing market has left individuals who are mainly millennials, in fear that they may never be able to purchase their first home due to the high costs. This fear has led the Government of Canada to introduce the Canada Mortgage and Housing Corporation first-time home buyer incentive in the Budget of 2019. The incentive is a shared equity mortgage that would allow first-time buyers to have the opportunity to receive lower borrowing costs. The rates for the loans are going to be lower for individuals by having the costs of purchasing a home be divided with the CMHC.

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In order to be able to receive the incentive, a set of criteria established by the CMHC must be satisfied. The first standard that will initiated as part of the incentive, is that the buyer must have an annual income that is less than $120,000. The second requirement is that the insured mortgage with the incentive must be less than four times the annual income of the individual. The last criteria is that the buyer must pay the down payment for the insured mortgage.

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Another advantage of this program is that the first-time buyer would not have to worry about regular payments. The repayment for the program has not yet been established by the CMHC, and will be announced shortly. However, it is important to highlight that the incentive will only be able to help buyers who are trying to purchase a home for a value up to $480,000 according to experts in the industry. There is also still debate on whether or not there will be a limit on the deposit or house value.

We will soon see for ourselves if this would help first-time home buyers, who are mainly millennials purchase a home in this certain market. Stay tuned with Prasad & Company this September if you are an individual who could benefit from this incentive program!