An Overview of the CMHC Down Payment Incentive for First-Time Home Buyers

An Overview of the CMHC Down Payment Incentive for First-Time Home Buyers

Justo Team | September 6, 2019

The CMHC First-Time Home Buyer Incentive became live earlier this month. Stylized as FTHBI, the main aim of this program is to help improve affordability levels for Canadian citizens buying a home for the very first time.


This down payment incentive is the result of shared equity with the CMHC. The CMHC, a government-owned body, provides 10% or 5% of the down payment for every first-time homeowner. In doing so, the CMHC can help you lower potential mortgage payments. Also, First-Time Home Buyer Incentive will help you to afford property below the $500,000 mark.


The down payment incentive exclusive to first-time home buyers helps to reduce monthly mortgage expenses drastically. This incentive offers:

  • 5% or 10% of your total purchase of a newly built home 

  • 5% of your purchase of an already existing home 

  • 5% of your purchase of a new/already existing manufactured/ mobile home. 


In this article, we will take a look at the benefits of this mortgage incentive for first-time homebuyers and how you can qualify to enjoy the FTHBI.

The benefits of the CMHC First-Time Home Buyer Incentive

Like all government incentives, there are rules to the down payment incentive for first-time homeowners. This program is a shared equity benefit. This means that the government owns a shared investment with you as far as your home is concerned. This means that ups and downs in property value also affects the government.


The primary benefit of this down payment incentive is that you do not have to pay as much on down payments out of pocket. That way, you can better afford the payments that come with your mortgage. Remember that more substantial down payments ultimately equal smaller monthly mortgage payments in Canada. 

Rules that govern the down payment incentive

There are rules to taking advantage of the CMHC’s down payment incentive. Firstly, you have to repay the government based on the fair market value of your home. This fair market value is determined as at the time of repayment. 


If you receive 5% to help with your down payment, you have to repay 5% of your home’s fair market value at the time of repayment. The same principle applies if you receive 10%. Also, you have to repay every dollar received from the incentive after 25 years. 


The payment can also be made if you sell the property. It depends on the condition that comes first. A first-time home buyer can also repay the incentive before 25 years without incurring a penalty for prepayment. 

Who is eligible for this program?

The first-time homeowners incentive is not for everybody living in Canada. To qualify for this program, you have to fulfil the following criteria.


  • A first-time homeowner that wants this incentive must own at least a 5% down payment on an insured mortgage in Canada.

  • You or a member of your family must be a first-time homebuyer. This means you have not owned or lived in a home owned by your spouse over the past four years. There are exceptions for divorces and other extenuating circumstances.

  • The combined income of all first-time homeowners should not be over $120,000. This includes the incomes of co-signers and rental income. 

  • The mortgage plus the value of the FTHBI must not be more than four times your total income. This means that if your income is $120,000. The maximum price of a home you can purchase is about $560,000.

  • The first-time homebuyer must be a citizen, permanent resident or a temporary resident that has the legal authority to work within Canada.


Do I get 5% or 10%?

If you are a first-time home buyer looking to buy an already existing home, you will be provided with an incentive of 5%. If you are looking to purchase a newly constructed property, the CMHC First-Time Home Buyer Incentive will offer up to 10% of down payments. 

Is the down payment incentive free?

Many people are already wondering if the first-time homebuyer incentive Canada is free. There is no upfront cost for this incentive. However, it is not free. It is the government making an investment (shared) in your home.


As mentioned earlier, you have to pay the government back after 25 years. Although, this payment is based on the fair market value of your home. Also, the government shares in the market rise and fall of your home.

Potential Savings from the Down Payment Incentive Canada

With this incentive for first-time homeowners, qualified participants in Canada can save as much as $3,500 annually on a $500,000 home. Of course, the CMHC will own a part of your home with this incentive. However, it definitely helps you with affordability, especially on mortgage payments. 


The first-time homeowners incentive is an excellent opportunity for people looking to purchase homes in Toronto and Vancouver. In fact, about 23% of home purchases in Toronto are under $500,000. That figure is 10% for Vancouver. 

Final take

This mortgage incentive is easy to use. Our team can help you with taking advantage of this program. All you have to do is apply for a mortgage via our online application process. It only takes 5 minutes. Our advisors can also guide you as you make your first step to owning a home. Contact us today!


By Justo Team

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