According to the CMHC (Canada Mortgage and Housing Corporation), the federal government will discontinue its First-Time Home Buyer Incentive program as of March 21st, 2024. This might come as a shock to many because, for five years, it has helped young home buyers make their first step when purchasing a home. With this news, you may be curious as to how this change will affect new home buyers. Luckily, isure has everything you need to know about the announcement and how future homeowners should navigate it.
What is the First-Time Home Buyer Incentive Program?
To understand how these changes will affect future home buyers, we must first understand what the FTHBI (First-Home Buyer Incentive Program) is. Introduced in 2019, this is a shared-equity program by the CMHC. It offers a government contribution of 5%- 10% towards the down payment on a new home if you are a first-time buyer. In return, you would receive a share of any future increase or decrease in the home’s overall value. Participants in the program are not required to make any monthly payments. However, once homeowners pay off the loan, the home’s appraisal will be either after 25 years or upon the property’s sale.
Criticism against the First-Time Home Buyer Incentive Program
Since the program’s creation, there has been plenty of criticism. As a result, the participation rate fell far below the government’s estimation.
After the unveiling, the government predicted $1.25 billion over three years from an estimated 100,000 homebuyers. As of March 2022, CMHC received fewer than 16,000 applications with only $285 million in shared equity mortgages. According to critics, the maximum permitted price of $505,000 under the program offered little help in assisting first-time buyers. This is because the country’s largest markets are priced significantly higher. Five months into the program, CMHC attempted to respond to this by raising the maximum price permitted under the FTHBI to $722,000 for those in Toronto, Vancouver, and Victoria.
CMHC says the program was initially scheduled for completion by 2022. However, it was extended in that year’s budget to December 31, 2025.
Brokers not surprised by discontinuation
This news has generated mixed reviews. However, most agree the program had little impact on addressing the larger crisis: the affordability of homes.
“I am not at all surprised it was canceled,” David Van Noppen, Mortgage Agent and owner of More Than Enough Financial tells CMT. “The uptake was so low as the cost to the client far outweighed the benefit, especially with the rise in home prices in the last five years.” Van Noppen adds that the program may have suffered from poor timing, as its release in 2019 fell a year before the pandemic hit.
“It was nice to be able to have a program that did work for many files in some of the provinces with lower price points,” says Karen Pacheco. Pacheco is an Alberta-based mortgage planner with Mortgage Architects. “Even though this program may have not been used by many markets, it was still popular in many areas. It is disappointing to see it being discontinued.” According to Pacheco, the program was a huge desire for her clients new to Canada and purchasing new builds.
What if I was planning on applying to the FTHBI?
According to the CMHC, any final submissions or re-submissions must be received no later than March 21st, 2024.
“If an application is submitted on or before March 21st and is declined due to an error, the mortgage loan insurer is responsible for rectifying the issue and resubmitting the application,” the agency said in its public notice. It added that applications resubmitted after the 21st will have to undergo a manual review. The cutoff for requests for such reviews was March 25th, 2024.
In conclusion
If you are in the market for a new home, having the proper home insurance for it will be crucial. If you’re unsure if this affects your insurance in any way, please contact us today.
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