You may already be aware of this, but did you know that the federal government's first-time homebuyer incentive can help you buy your first home? In fact, this incentive helps you without increasing your financial burden. In addition to having no additional monthly payments to meet, first-time buyers must have the minimum down payment required to take out an insured mortgage.

The Government of Canada is therefore paying first-time homebuyers 5% or 10% for a new home, 5% for an existing home, and 5% for a new or existing manufactured mobile home. Of note, the incentive is available to first-time homebuyers with a qualifying annual income of $120,000 or less. The amount of the participant's insured loan and the amount of the incentive cannot total more than four times the participant's qualifying income.

Here is a concrete example that will give you an idea of how much you will save if you take out this incentive:

You have your eyes set on a new property worth $400,000. Under the incentive program, you can apply for $40,000 in the form of a participation mortgage. This will reduce the amount you have to borrow, as well as your monthly expenses. And according to our calculations, your mortgage payments would be $240* less per month for a savings of $2,880 per year.

Are you eligible for the incentive?

To understand whether you are eligible for this incentive, here are some criteria you will need to meet:

• Your total annual qualifying income must not exceed $120,000.
• Your total loan must not exceed four times your qualifying income.
• You or your partner must be a first-time buyer in good standing.
• You must be a Canadian citizen, a permanent resident or a non-permanent resident authorized to work in Canada.
• You must meet the minimum down payment requirements from traditional means (savings, RRSP, donation, etc.)

The incentive is considered a second mortgage on the title of your property. Your mortgage must represent more than 80% of the value of the property and is subject to a mortgage loan insurance premium. In addition, it must also be valid for CMHC insurance.

Additional information to know

Of course, you will need to allow for additional costs associated with the incentive.

At first glance, your notaries may both charge you a fee, as either will have to close two mortgages. To pay off the incentive, you may need to get an appraisal of your property to determine its market value. There will also be additional fees until the incentive is paid off, such as when you transfer your first mortgage to a new lender or refinance. Finally, there may be a fee to consider an additional mortgage registered on the property. Talk to your insurance broker or insurer to find out more.

Despite the rapid increase in interest rates, the federal government's first-time homebuyer incentive could help you realize your dream... and with the right advice from a mortgage broker, you could buy your first home with peace of mind!

*Calculations made with a rate of 5.30% amortized over 25 years.