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 when it comes to the announcement and how future homeowners should navigate.
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 of a new home if you are a first-time buyer. In return, you would give a share in the future increase or decrease in the home’s overall value. People who participated in the program were not required to make any monthly payments. However, when the load was paid, the home’s appraisal would 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, it faced much 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 estimation of 100,000 homebuyers. As of March 2022, CMHC received less 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 were 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 that the program was initially going to be done by 2022, though 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 agreed that the program had very little impact when it came to 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 on homes,” says Karen Pacheco, 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, and it is disappointing to see it being discontinued.” According to Pacheco, the program was a huge desire for her clients who were new to Canada and purchasing new builds.
What if I was planning on applying to the FTHBI?
As of the time this article is posted, applications are still being accepted. According to the CMHC, any final submissions or re-submissions must be received no later than March 21st.
“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. Requests for such reviews will have to be received by March 25th, 2024.
In conclusion
Remember, 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 your insurance will be affected by this new development, please contact us or request a quote today.
