First Time Home Buyer Incentive (FTHBI) benefit calculator

Last updated: June 3, 2022

What this tool is all about:

This tool helps you calculate the benefit of buying with the new First-Time Homebuyer Incentive (FTHBI) program. If you’re not familiar with the program, you can read more about it in this article.

Disclaimer: Perch does not guarantee the accuracy of these results and should not be treated as a recommendation. Consult a professional prior to making any decisions as it relates to your current or future real estate transactions. Please refer to our
Terms of Use for more information.

If you are a Canadian first-time home buyer, you might be eligible to sign up for the First-Time Home Buyer Incentive (FTHBI) program. The FTHBI is a program by the Government of Canada to provide financial assistance for first-time home buyers. The FTHBI is a shared equity program which allows first time home buyers to borrow up to 10% of the home value towards their down payment. This incentive will reduce the cost of borrowing by lowering your mortgage insurance and interest costs.

However, there are many factors you need to consider before using the incentive, such as the location of your home and the timeline of when you plan to purchase and sell. All of these factors will be crucial when it comes to figuring out whether the new home buyer incentives will be beneficial for you later on.

The Government of Canada has changed the first-time home buyer incentive to limit the upside and downside payable per year in housing to 8%. This applies retroactively to anything done since 2019 as well.

Appreciation of a home

the Government of Canada will limit its share in the appreciation of a home, where homeowners will need to pay back up to a maximum gain of 8% per annum (not compounded) on the incentive amount from the date of advance to the time of repayment. This incentive calculation is retroactive to the implementation date of the first-time home buyer incentive, September 2, 2019.

Depreciation of a home

The Government of Canada will also limit its share in the depreciation of a home at the time of repayment. This is up to a maximum loss of 8% per annum (not compounded) on the Incentive amount from the date of advance to the time of repayment. This incentive repayment calculation applies to all borrowers who have signed a shared equity mortgage agreement on or after June 1, 2022.

In order to qualify, the borrower must meet the government’s definition of a first-time home buyer:
    • You plan on purchasing your first home that you will occupy as your primary residence
    • You’ve recently experienced a breakdown of a marriage or common-law partnership. This applies even if you don’t meet the other first-time home buyer requirements
    • You’re not living in a home that you or your current spouse or common-law partner owned in the previous 4-year period
In addition to the above, there are a few other factors that will determine whether you are eligible for the FTHBI, You can read the full criteria here to see whether you qualify. New qualification rules in Canada’s high priced markets of Toronto, Vancouver and Victoria:
    • Qualifying income has increased to $150,000 from $120,000
    • Borrowers can now borrow up to 4.5 (increased from 4) times their household income
While using the FTHBI, it is estimated that the highest possible purchase price anyone could buy is :
    • $565,000 in any city except Toronto, Vancouver or Victoria
    • $792,000 in Toronto, Vancouver or Victoria
If you are looking to buy above this range, you wouldn’t be able to utilize the FTHBI.
In order to qualify as a first-time home buyer, borrowers must meet the standard requirements listed above. For new builds for first-time home buyers, you can borrow either 5% or 10% of the property value, while all other properties will be 5%.

New construction 5% or 10% of the purchase price
Existing home 5% of the purchase price
New/existing mobile or manufactured home 5% of the purchase price

The repayment amount will depend on the fair market value of your home at the time of selling, so your numbers could be drastically different when it comes to repayment time. As an example:
  • You receive a 5% incentive of your home’s purchase price of $500,000, or $25,000 (0.05% x $500,000 = $25,000). If your home value increases to $600,000, your payback would be 5% of the current value or $30,000.
  • You receive a 5% incentive of the home’s purchase price of $500,000, or $25,000. If your home value decreases to $400,000, your repayment value will be 5% of the current value or $20,000.

You have the option to pay back your first-time home buyer incentive at any time without any penalties, unlike a mortgage prepayment penalty where you would have to pay a fee if you decide to pay some or all of your loan off early. However, you are required to pay back your incentive in full at the earlier of 25 years or when you decide to sell your home. Keep in mind that if you do use your FTHBI and break your mortgage early, you will also have to pay a prepayment penalty.

There are other events that can trigger re-payment:

  1. You go through a break up and you want to buy out the co-borrower. If this requires additional insured funds, you must pay back the Incentive in full.
  2. Porting your mortgage will trigger a repayment of the Incentive.
  3. A partial release of security is considered a sale and will trigger repayment of the Incentive.
With a FTHBI, you have to pay back the original incentive percentage based on the current market value of your home. This means the amount you owe will be based on the value of your home at the time you are paying it back. So if your home has gone up in market value, you will have to pay more than what you initially borrowed.

This is especially punitive if you plan on making renovations or upgrades to your property, since the increase in value would then result in you needing to pay back a percentage of that hard work to the government.
There are no interest payments with the FTHBI, but when the time comes, the government will take back the same percentage of the value of the home sale that they initially contributed. If your home appreciates in value, the government will be benefiting from the increase in home value with you.
You will still owe the same percentage of your incentive. You might be paying back less than what you initially borrowed, but if you think about it, you still have to pay back the government the same percentage on the revised value of the home while you are losing money on your home.

This incentive is meant to provide help for first-time home buyers. Many obtain the FTHBI so that they can have a larger down payment thus resulting in a smaller mortgage and lower monthly payments.

However, qualifying as a first-time home buyer doesn’t always mean it will be beneficial for you. Although you might be saving on your mortgage, if your home appreciates in value and you have to owe back your initial incentive and more, the amount you pay back could potentially be well above your interest and mortgage insurance savings. By taking the incentive, you could be giving up a significant portion of the tax-free upside of your home if it goes up in value.

The FTHBI is good for low income, first-time home buyers who want to get into the housing market sooner and don’t mind paying an extra amount later down the line, but it is not guaranteed to save you money.

If you’d like to learn more about the pros and cons of the FTHBI you can read about it here.

The path to owning your first home might be a little daunting, but we have created tools to help you along the way. Our First-Time Home Buyer Incentive Benefit Calculator provides you with a cost breakdown and will help you easily assess whether the program will be beneficial to you.

You’ll be able run a few numbers so you can make the right decision of whether you should move forward with the incentive. Ultimately, this tool will help you determine whether the mortgage savings are worth the payback in equity if the value of your home increases.

What you’ll need:

    • Down payment amount, which is the amount of savings you currently have that can go towards the purchase of a property
    • The FTHBI amount of 5% or 10%
    • The household gross annual income, which must be less than $120,000; or less than $150,000 if you live in Toronto, Vancouver or Victoria
    • The property type, city and age of the borrower
    • The expected annual property growth, which is the estimated percentage of how much you expect the property to appreciate in a year (if you don’t have a number in mind, the calculator will use the historical average to make the calculation)
    • The estimated minimum number of years you’ll own the property, before selling

All you need to do is plug in your numbers and the calculator will determine:

    • The purchase price of a home that you would qualify for
    • The calculation of the total down payment you can afford with the FTHBI
    • An estimated mortgage amount you will be able to afford
    • The monthly mortgage payment amount
    • An estimate of how much you would lose or save with the FTHBI

Things to consider before obtaining the FTHBI:

    1. You will need to pay additional fees such as lawyer fees, since the FTHBI is a second charge on the property. The Government of Canada, like the lender, places a charge on your property to ensure they protect their capital. This means they get paid back first if your property ever goes into default (in other words, you stop making payments). You’ll also need to pay a second appraisal fee to know the exact value of your home and how much you owe back when you sell.
    2. If you move before the end of the 25 year period, the FTHBI will not transfer over to your new property. You will have to pay out in full as soon as you sell. This can result in my homeowners feeling trapped into living in their first home purchase.
    3. As a new buyer, you might want to instantly make renovations or upgrades to your home. By doing this you could significantly increase your home’s value and are technically paying to increase the government’s portion of the house. It’s best to hold off on the renovations until you first pay off your incentive.

Here are a few tips to help you maximize your value:

  1. Try and obtain the cheapest first time buyer mortgage rate you can find. With Perch, we can help you compare several different mortgage rates at the same time to find the best deal. The amount you save on interest can go towards paying off your incentive.
  2. It’s a good idea to open up a TFSA and be diligent about how much you put aside each month. You never really know what the value of your home will be when you sell.
  3. Since there is no penalty when it comes to paying your incentive early, try and pay it off before the end of the 25 year timeline. That way you can benefit more from your home’s appreciation.

If you have used our FTHBI Benefit Calculator and still have questions, you can sign up for a free Perch profile today to speak to one of our mortgage advisors who can provide you with more insights on the FTHBI program.

If you are buying a house for the first time and want to know about the other tools to help you along the way, read our step-by-step Guide to Buying a Home.