The eligible candidates under this program include first-time home buyers whose income does not exceed a certain level.
The Canadian government has approved a program, according to which the Canadian Mortgage and Housing Corporation (CMHC) will pay up to 10% of the purchase price for first-time home buyers. However, certain conditions apply.
The program will allow first-time home buyers to reduce monthly mortgage payments. Buyers can get an interest-free loan of up to 5% to finance a second-hand property and up to 10% to buy a new house.
Applications will be accepted from September 2 to November 1.
To be eligible for benefits, real estate buyers must have a maximum annual income of C$120,000 before taxes and make a minimum down payment of 5%.
For instance, a family buying a house for C$500,000 will save up to C$286 a month or more than C$3,430 a year.
However, there is a condition: the buyer must pay the full benefit after 25 years of ownership or in case of selling the property.
If a borrower makes a C$25,000 of down payment and the CMHC offers the same amount as an interest-free loan, CMHC will own 5% of the house. And if the borrower wants to sell the house for C$600,000 in the future, he will have to give CMHC 5% of the sale price — or C$30,000 in this example, rather than C$25,000 that he originally received.
In addition, the insured mortgage and benefit combined cannot exceed four times the family annual income. The sum of the mortgage with the CMHC incentive is limited to C$480,000. With a downpayment of 15%, the value of the house cannot exceed C$565,000. With this restriction, the program may not be as effective in Canada’s hottest housing markets — Vancouver and Toronto.