The long awaited launch of a major government initiative to make homebuying cheaper in Canada is going live next week on Sept. 2.
The government is touting that Canadians who plan to buy a home with help from the incentive program can expect to save an average of $286 a month on their mortgage payments. Only buyers who have a household income of less than $120,000 can take advantage of the First Time Home Buyer Incentive (FTHBI).
These savings would be available without the buyers having to increase their down payments, said Jean-Yves Duclos, minister of families, children and social development. However, a buyer’s exact savings could vary depending on their amortization, interest rates and mortgage terms.
How does this work? The FTHBI, which was first introduced in the federal budget back in March, was developed by the government to help first-time homebuyers in an expensive national housing market by contributing between 5% and 10% of their total down payment amount.
That money does not need to be repaid to the Canada Mortgage and Housing Corporation (CMHC), the government agency responsible for administering these contributions, until the homeowner decides to sell. In the meantime, the government would have a shared equity stake in their home, which means that the government is a co-owner.
“Through the National Housing Strategy, more middle-class Canadians — and people working hard to join the middle class — will find safe, accessible and affordable homes,” said Duclos in a statement. Duclos is also the minister who oversees the CMHC.
“Thanks to mortgage payments that are more affordable, many families will have hundreds of dollars more each month in their pockets,” said Majid Jowhari, MP for Richmond Hill, Ont. Jowhari added that the monthly savings could be reserved for healthy food, future savings or sports activities for children.
As the rental markets in Canada’s biggest cities remain tight, and home prices continue to stay out of reach for many, critics have praised the FTHBI for helping to take pressure off cash-strapped buyers.
Still, others are wary that the program fails to address the root of the problem: high housing prices.