The biggest criticism of the federal government’s new First-Time Home Buyer Incentive (FTHBI) is that the purchase price is capped at about $505,000. That leaves all first-time home buyers in Toronto looking for a single-family home in the dust since the average property across the Greater Toronto Area ranges between $978,920 — $1,246,392 in the 416, and $918,242 in the 905, according to the most recent data by the Toronto Real Estate Board.
How the First-Time Home Buyer Incentive Works
The government will offer you 5% (or 10% for a new build) towards the down payment of your house so you’re able to get a smaller mortgage from the bank and thus reduce your monthly burden. At the end of your 25-year mortgage, you’ll pay the government back from the appraised value of your home, with the according appreciation. For example, if they loaned you 5%, you’ll pay them 5% of whatever the home’s value is when it is sold, or when the mortgage matures. If you sell your home, you’ll pay them 5% of the selling price. You also have prepayment privileges, without penalty. Essentially, the government owns 5% of your house.
Program Not Far Reaching in GTA Markets
But, when the program first rolled out a few weeks ago, there were zero neighbourhoods in both the City of Toronto and the 905 in which first-time home buyers looking for a detached house would benefit from this program. Suburbs close to Toronto like houses for sale in Mississauga and Oakville houses for sale are disqualified, with sold prices more than double the purchase price cap, at $1,063,529 and $1,368,460, respectively. Even Durham Region and Simcoe County, which are the least expensive regions in the GTA, are out of reach, with the cheapest city being Brock — and a detached house there still averages $510,472.
Buyers would have to drive at least two hours to the Niagara Region, London or Windsor to take advantage of this program. You can find houses there for $452,654, $405,551 and $335,253 respectively.
Election Promises Made to Expand Program
However, after disgruntled first-time buyers from expensive regions made their issues heard, the Liberal government has promised to tweak the program. (It obviously helps that it’s election season.)
Under current qualification rules, you need to have a household income of $120,000 or less, and a mortgage plus incentive of no more than four times your income. If the new rules go into effect, buyers in Toronto, Vancouver, and Victoria can qualify with a household income of up to $150,000 and a mortgage plus incentive of five times your income. This leaves the available purchase price of $789,473. That widens the door to many cities across the GTA.
With this new purchase price limit, buyers in the following cities would now qualify: Georgina ($558,333), Ajax ($712,425), Brock ($510,472), Clarington ($619,375 ), Oshawa ($554,891), Scugog ($587,210), Whitby ($774,928), Orangeville ($622,035) and across the entire Simcoe County ($653,200) and Toronto W10, which is one area in Etobicoke ($785,400), and Toronto E09, one area in Scarborough ($745,893).
The government committed $1.25 billion over three years for this program, and expect 120,000 users, which signifies its belief in the housing market and its continual rise. However, it could also have the effect of making housing prices rise further in already expensive areas, by stoking demand. Ultimately, we’ll have to wait and see how the upcoming election on October 21 goes to see if this program will even survive.
To see more information on the First Time Home Buyer’s Incentive, check out the infographic below:
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