What Was the First Time Home Buyer Incentive?

The First-Time Home Buyer Incentive, often referred to as FTHBI, was first introduced in September 2019 by the government of Canada as a tool to help prospective buyers purchase a home in an increasingly difficult marketplace. It was subsequently amended in May 2021 to reflect changing criteria in Toronto, Vancouver and Victoria.

As of 2024, it is no longer accepting applicants. 

How FTHBI Worked

This program offered 5% or 10% of a property’s purchase price—depending on the type of home—in the form of a shared equity mortgage with the Canada Mortgage and Housing Corporation (CMHC). The idea was that, by reducing the mortgage amount, first-time buyers could enjoy lower monthly mortgage payments. These were its key features:

• Shared Equity Mortgage: The government would offer 5% of the property’s purchase price for existing homes and up to 10% for new construction.
• Repayment Timeline: Buyers had to repay the government’s stake within 25 years or when they sold the property—whichever came first.
• No Ongoing Monthly Payment: Unlike a typical loan, the FTHBI did not require monthly payments on the government’s share; the total amount (or proportional share) was simply due in a lump sum later.

This model made the FTHBI attractive to borrowers looking to keep their monthly housing costs as low as possible. Indeed, one of the main draws was the ability to reduce mortgage insurance premiums on properties with less than 20% down payment.

However, the shared-equity nature of the program meant the government’s stake could increase if the property’s value went up—and decrease if it went down.

Why the First-Time Home Buyer Incentive Is No Longer Accepting Applicants

The FTHBI was officially discontinued for new applicants (with announcements made that the current version of the incentive would end, and no new applicants would be processed). Several factors influenced this outcome:

1. Low Uptake: While the idea behind the FTHBI was promising, the program did not see the high level of adoption that was initially hoped for. Many prospective buyers found the shared equity aspect unappealing, or they couldn’t meet the program’s qualification requirements.

2. Market Conditions: Canada’s housing market has been on a steady incline, with some regions experiencing rapid price growth. The FTHBI’s maximum purchase price thresholds and borrower qualification limits often didn’t keep pace with real-world housing prices, especially in pricey markets like Toronto and Vancouver.

3. Evolving Housing Programs: Over time, new and modified federal and provincial initiatives emerged, some of which offered more straightforward benefits to first-time buyers. Programs such as the Home Buyers’ Plan (HBP) and the Tax-Free First Home Savings Account (FHSA) have increasingly gained attention and may be more appealing to many Canadians.

4. Government Focus Shift: Governments periodically update their priorities and budget allocations. With housing affordability continuing to be a major talking point in Canada, the federal government might pivot to programs that can address the needs of first-time buyers more directly or offer more comprehensive support.

Regardless of the reasons, the closure of the FTHBI left many prospective buyers wondering how to move forward. Fortunately, several other support mechanisms are available.

Alternatives to Consider

Even though the FTHBI is no longer an option, that doesn’t mean you’re out of luck. Here are some notable programs and strategies worth considering:

Home Buyers’ Plan (HBP)

The Home Buyers’ Plan allows first-time buyers to withdraw up to CAD 35,000 from their RRSPs ($70,000 for a couple) to use toward a down payment. Here’s what you should know:

• No Immediate Tax Penalties: You won’t pay taxes on the withdrawal as long as you repay it into your RRSP within 15 years.
• Who Qualifies?: Generally, anyone classified as a first-time buyer, or those who haven’t owned a home in the last five years, can apply.
• How It Helps: If you’ve been diligently saving in an RRSP, this can be a powerful tool for boosting your down payment.

Tax-Free First Home Savings Account (FHSA)

Launched in 2023, the FHSA allows eligible Canadians to contribute up to CAD 8,000 per year (to a lifetime limit of $40,000) into a tax-sheltered account specifically for purchasing a first home.

• Tax-Deductible Contributions: Like an RRSP, contributions can be deducted from your taxable income.
• Tax-Free Withdrawals: If the funds are used for a qualifying home purchase, withdrawals are entirely tax-free.
• Who Qualifies?: Canadian residents 18 or older who haven’t owned a home in the last four years.

Provincial Tax Credits and Rebates

Depending on where you live, provinces offer various tax credits, rebates, or lower land transfer fees for first-time buyers. For instance, Ontario offers a Land Transfer Tax Refund of up to CAD 4,000 for eligible first-time buyers. British Columbia has a Property Transfer Tax (PTT) exemption for first-timers on properties under a certain price limit.

These credits and rebates might not be as substantial as a shared equity mortgage, but they can certainly help by reducing your overall closing costs.

Co-Buying Arrangements

If saving for a significant down payment seems challenging, you can consider co-buying with a friend or family member. This approach:

• Splits Costs: By dividing the purchase price, mortgage payments, and closing costs, you can enter the market sooner.
• Involves Shared Responsibility: Co-ownership requires clear legal agreements and an understanding of each party’s responsibilities.

Mortgage Insurance

Even without the FTHBI, a down payment of 5% to 19.99% is possible, but you’ll have to add mortgage insurance (often through CMHC, Sagen, or Canada Guaranty). While this increases your monthly costs, it does enable you to own a home with less money upfront. Over time, you may decide to refinance to remove insurance once you’ve reached 20% equity.