Launched in 2019, the First-Time Home Buyer Incentive (FTHBI) was created to give new homeowners a chance to ease some of the burden of taking out a mortgage. Unfortunately, the program failed to take off, coming to a halt after the federal government announced its shutdown in March 2024.
Read on to learn more about the FTHBI and why it was discontinued, and find alternative incentives and assistance programs to make buying your first home a reality.
What is a First-Time Home Buyer Incentive (FTHBI)?
With the current housing supply shortage and sky-high mortgage prices, buying real estate in Canada is far from easy. The Government of Canada launched the First-Time Home Buyer Incentive or FTHBI in 2019 to help make homeownership more accessible to first-time buyers.
As an interest-free, shared-equity mortgage, the initiative offered the following benefits to new home purchasers:
Requirements to Be Eligible for an FTHBI
To be eligible for an FTHBI, first-time home buyers had to meet at least one of the following conditions:
- Never purchased a home before
- Did not occupy a home that the buyer or their current spouse or common-law owned in the last four years
- Recently experienced the breakdown of a marriage or common-law partnership
On top of this, buyers must meet the following criteria:
- Have a total annual qualifying income not exceeding $120,000 ($150,000 if the home purchased was in Toronto, Vancouver or Victoria).
- Have a total borrowing (the amount of the mortgage plus the amount provided by the program) of no more than four times the qualifying income, or 4.5 times for homes in Toronto, Vancouver, or Victoria.
- Be a Canadian citizen, permanent resident, or non-permanent resident authorized to work in Canada.
- Meet the minimum down payment requirements with traditional funds, i.e. savings, withdrawal/collapse of a Registered Retirement Savings Plan (RRSP) or a non-repayable financial gift from a relative/immediate family member.
FTHBI Program Discontinuation
The FTHBI was discontinued by the Canada Mortgage and Housing Corporation (CMHC) in February 2024. The deadline for new submissions was March 21, 2024, with no new approvals to be granted after March 31, 2024.
In an emailed statement, the CMHC told lenders that “the Government of Canada committed to refocusing federal spending to continue to serve Canadians most effectively” and that the FTHBI “cannot provide significant impact to address housing challenges, as currently designed. This change ensures that the government continues to invest in areas focused on increasing housing support and restoring affordability levels for Canadians”.
Why The Program Failed
Reports on the program’s shutdown cited stringent eligibility requirements (like household income and mortgage size limits) and the resulting low acceptance rates as some of the possible reasons the program was discontinued.
Another issue noted was buyers’ reluctance to co-own a home with the government. According to the CMHC, the shared equity component meant that the government would share in “both the upside and downside of the property value, up to a maximum gain or loss equal to 8% per annum (not compounded) on the incentive amount from the date of advance to the time of repayment”.
For buyers looking to sell their homes in the future, this agreement meant that homeowners would have to share the profits with the lender upon selling.
Finally, with so few applicants making the cut, the resulting administrative costs may have hampered the sustainability of the program.
FTHBI Program Alternatives
If you were looking to finance your mortgage through the FTHBI, don’t fret. There are plenty of other alternative programs out there.
Compare the FTHBI with other existing incentive and tax credit programs below:
| First-Time Home Buyer Incentive | RRSP Home Buyers’ Plan | First Home Savings Account (FHSA) | |
|---|---|---|---|
| Overview | A shared-equity mortgage that provides an additional 5 to 10% of the purchase price of a home that the buyer will put into the downpayment | Lets first-time home buyers withdraw up to $60,000 from their Registered Retirement Savings Plan to fund a mortgage down payment | A tax-free savings account in which home buyers can deposit up to $8,000 yearly, with a total limit of $40,000 |
| Eligibility Requirements | Open to Canadian citizens, permanent residents, or non permanent residents authorized to work in Canada. Must be a first-time home buyer. The buyer’s total annual qualifying income should not exceed $120,000 and have a total borrowing amount not exceeding four times the qualifying income. Meet the minimum down payment requirements with traditional funds. | Open to first- time home buyers who are residents of Canada and have sufficient funds in their RRSP plan. Buyers must plan to use the home as their principal residence within a year of building or buying. Co-op houses don’t always qualify. | Open to first-time home buyers who are residents of Canada and at least 18 years and older and younger than 71 when opening the account. |
| Repayment Conditions | Must be repaid within 25 years | Must be repaid into the buyer’s RRSP within 15 years | n/a |
Provincial Alternatives
Though the federal first-time home buyer initiative didn’t take off, some provinces still offer their own incentives for first-time home buyers. Ontario has two — the Ontario First-Time Home Buyer Incentive and the Toronto First-Time Home Buyer Incentive.
See how these provincial incentives fare compared to the discontinued federal program below:
| First-Time Home Buyer Incentive | Ontario First-Time Home Buyer Incentive | Toronto First-Time Buyer Incentive | |
|---|---|---|---|
| Overview | A shared-equity mortgage that provides an additional 5 to 10% of the purchase price of a home that the buyer will put into the downpayment | First-time home buyers are given a land transfer tax return refund amounting to a maximum of $4,000. | Only available to residents of the city of Toronto. Offers a land transfer tax rebate of up to $4,475. |
| Requirements | Open to Canadian citizens, permanent residents, or non-permanent residents authorized to work in Canada. Must be a first-time home buyer. The buyer’s total annual qualifying income should not exceed $120,000 and have a total borrowing amount not exceeding four times the qualifying income. Meet the minimum down payment requirements with traditional funds. Must repay the mortgage within 25 years. | Must be 18 years old, a Canadian citizen or permanent resident, and a first-time home buyer whose spouse or common-law partner has never owned a home. | Must be 18 years old, a Canadian citizen or permanent resident, and a first-time home buyer whose spouse or common-law partner has never owned a home. |
How Much Does Insurance Cost for First-Time Home Buyers?
First-time buyers can expect an average home insurance rate of roughly $50 a month — depending on your property’s location, condition, and safety risks. Insurance rates are higher in urban areas like Toronto and Ottawa and areas prone to extreme weather conditions and flooding.
Key Advice From MyChoice
Now that we’ve learned more about the FTHBI, here are some top tips we can share:
- With the discontinuation of the FTHBI, it’s crucial to research and compare alternative programs such as the RRSP Home Buyers’ Plan, HBTC, FHSA, and provincial incentives.
- Make sure you understand the specific eligibility requirements of each program before you apply.
- Before applying, evaluate the repayment terms and conditions of each program.