First Time Home Buyers Incentive

First-Time Home Buyers Incentive KRISTI SAUTER – TRILOGY MORTGAGE CORPORATION

Program Information • The First-Time Home Buyers Incentive (FTHBI) was introduced to help make homeownership more affordable for first-time homebuyers.

• The FTHBI allows eligible first-time homebuyers who have the minimum down payment for an insured mortgage, to apply to finance a portion of their home purchase through a form of shared equity mortgage “incentive” with the Government of Canada.

• 5% incentive is available for the purchase of an existing home or mobile/manufactured home (new or existing).

• 5% or 10% incentive is available for the purchase of a newly constructed home to qualified buyers.

• The incentive enable first-time homebuyers to reduce their monthly mortgage payment, without increasing the amount that they must save for a down payment.

• The shared equity component of the incentive means that the Government shares in the upside and the downside of the value at the time of repayment. The incentive is repayable at the earlier of 25 years OR the sale of the property.

• Homebuyer can repay the incentive in full at any time, without a pre-payment penalty.

GENERAL INCENTIVE CRITERIA The first mortgage must be eligible for mortgage loan insurance through either Canada Guaranty or CMHC or Genworth

Loan to Value (LTV) Requirement

Mortgage Loan Insurance Premiums

• LTV must be greater than 80% at the time of incentive approval.

• The premium is based on the LTV ratio taking into account the first mortgage only.

• LTV ratio calculated based on first mortgage ONLY

• First mortgage is based on the lending value less total down payment (i.e. the borrower’s contribution of the down payment plus the incentive) *The lending value is the lesser of the purchase price and the fair market value of the home, as determined by the respective Mortgage Loan Insurer.

• For example, if the borrower provides a 5% minimum down payment from traditional sources and receives an incentive of 5%, the mortgage loan insurance premium will be based on a 90% LTV ratio. *Premium calculations are subject to the respective Mortgage Loan Insurer’s policies and are subject to change.

Property Type; • • • •

Incentive Amount (%)

Existing Home = 5% Incentive New Construction = 5% or 10% Incentive Existing or New Construction Mobile/Manufactured Home = 5% Applicable incentive percentage available is based on the lending value, which is the lesser of the purchase price and the fair market value of the home, as determined by the respective Mortgage Loan Insurer.

Maximum Incentive Amount (%) • For a 10% incentive, the maximum down payment is 9.99%.

For a 5% incentive, the maximum down payment is 14.99% • In order to maintain the LTV requirement of the FTHBI Program (must be >80%), the maximum incentive the borrower may be eligible for must be reduced from 10% to 5% where additional down payments requirements apply based on the respective Mortgage Loan Insurer’s policies.

MAXIMUM CLOSING DATE • The maximum closing date for an existing home is 6 months from the of application approval.

• The maximum closing date for new construction is 18 months from time of application approval. *Application approval is last approval date on file

Incentive Term • Must be 25 years

Incentive Loan Security • Incentive must be structured as a second ranking mortgage which will be registered immediately following the first insured mortgage.

• Security for incentive MUST be same as first insured mortgage

Incentive Loan Security

• First insured shall NOT be insured by collateral mortgage UNLESS first ranking lender has expressly subordinated any uninsured loan components of the collateral mortgage to the incentive.

• In the case of Indigenous Lands, in accordance with the first insured mortgage, the security of the incentive may be a ministerial loan guarantee (MLG) or a leasehold mortgage permitted in accordance with the Indian Act, First Nation Land Management Loan Insurer.

Where an MLG applies, the housing loan must be in accordance with the requirements set out by the Indigenous Services Canada (ISC) and meet requirements for mortgage loan insurance.

• Alternatively, where the first insured loan is under the First Nation Market Housing Fund (FNMHF), the Incentive may be guaranteed by the First Nation and backed by the FNMHF by the participating First Nations.

• In the case of a mobile/manufactured home, the security must be registered under the applicable personal property regimes ad mobile/modular home registries, as required.

Where the mobile or manufactured home is affixed to borrower-owned land, a mortgage of the land is also required.

Purchase Plus Improvements • The as-improved lending value will be used when calculating the maximum incentive amount and the incentive will be advanced at time of closing (whether single or progress advances).

• In accordance with standard mortgage loan insurance requirements, Lenders are required to retain on file verification of completion of home improvements or notify the respective Mortgage Loan Insurer where improvements will no longer be carried out. If improvements are NOT carried out, the borrower will be responsible for the reimbursement of any over-advanced incentive funds.

First-Time Homebuyer At least ONE borrower must be a first-time homebuyer.

First-Time Homebuyer Criteria;

Borrower Eligibility and Qualification Criteria

• Never purchased a home before • In the last 4 years, has NOT occupied a home that either themselves, or their current spouse/common-law partner owned: or • Gone through a breakdown of marriage or common-law partnership (even if other first-time homebuyer requirements are met) *even if borrower or their spouse/common-law partner have previously owned a home, they may still be considered a first-time homebuyer and be eligible for incentive.

NOTE – Begins on January 1st of the fourth year before the incentive is funded and ends 31 days before the date the incentive is funded.

Maximum Number of Incentives per Borrower/Coborrower/Guarantor

A borrower/co-borrower/guarantor is only permitted to obtain the incentive once.

The maximum of ONE incentive includes any variation of borrower/co-borrower/guarantor status (i.e. once an incentive is disbursed, the borrower/co-borrower/guarantor is not eligible for an additional incentive regardless of any new first-time homebuyer on the application.

Equity

Income

Borrower must satisfy minimum down payment requirements, which must come from traditional down payment sources. Non-traditional down payment sources are not eligible to satisfy minimum down payment requirements

Total qualifying income must not exceed $120,000 per annum. The verification of total qualifying income is subject to the requirements set out by Lenders and respective Mortgage Loan Insurer’s policies.

Mortgage to Income (MTI) Ratio

MTI Ratio

The MTI Ratio relates mortgage to income as follows: First Mortgage + Incentive ____________________

MTI must NOT exceed 4.0

Total Qualifying Income < 4.0

Debt Service Ratios

For clarity, when calculating the debt service ratios at the time of the mortgage loan insurance application, the incentive is not to be considered a debt obligation and therefore does not need to be included in the borrower’s total Debt Service (TDS) ratio calculation.

Occupancy • Property MUST be intended for owner occupancy as the borrower’s primary residence.

Location

Property Eligibility

• Property MUST be located in Canada and must be suitable and available for full-time year-round occupancy.

Property Insurance • Borrower must keep in full force and effect property insurance in an amount of not less than 100% of the full replacement costs of the building(s) with coverage against, at least the perils of fire and other standard insurable perils. Property Insurance must always show the Program Administrator as a loss payee and Mortgagee as its interest appears.

Incentive Advancing Incentive will only be advanced at time of closing of the insured first mortgage.

Closing Costs • The borrower will be responsible for all legal and other costs associated with the registration of the incentive as well as costs relating to the settlement and advancing of funds, as determined by the Program Administrator

• Mortgage Assumption, Release and/or Replacement of Covenant • Dissolution of Relationship/Buyout of Co-Borrower’s Interest in the Property

Loan Administration

• Substitution of Security (Portability) - Considered to be a sale of the property, is NOT permitted under the FTHBI Program.

Accordingly, a substitution of security will trigger repayment of the incentive • Partial Release of Security • Change in Intended Use of Property – Occupancy • Change in Lender of First Ranking Mortgage (switch from one lender to another) – change in lender whether initiated by the borrower or purchased by the acquiring lender will NOT trigger repayment of the incentive.

• Refinances

Incentive Repayment • The borrower will repay the Program Administrator in accordance with the percentage of the incentive (either 5% or 10%) received at the time of the home’s purchase.

• The Program Administrator will share any appreciation or depreciation based on the fair market value of the home at the time of repayment, regardless of any borrower spending to improve the property.

• The borrower may voluntarily choose to repay the full amount of the incentive at any time, however partial repayments are not permitted.

• The borrower MUST repay the entire incentive at the earlier of 25 years or if the property is sold.

• Additional events throughout the life of the incentive may trigger repayment. The Program Administrator reserves the right to add or amend the terms and conditions necessary for the incentive calculation at time of repayment.

• The Program Administrator at its discretion may agree to allow the incentive to be extended or allow the repayment requirements to be modified in hardship situations.

• In the event of repayment triggered by the sale of the property, the incentive amount must be based on the market value of the property at the time of sale which is generally supported by the purchase price as stated in the purchase and sale agreement.

Property Valuation at the Time of Incentive Repayment

• In the case where the sale is non-arm’s length to the borrower, an independent third-party appraisal performed by an appropriately qualified real estate appraiser must be obtained.

• In the case of an early voluntary repayment, the incentive amount must be calculated using the fair market value of the property. An independent thirdparty appraisal performed by an appropriately qualified real estate appraiser must be obtained at time of repayment.

• Where the repayment is triggered by the expiry 25, the incentive must be determined using the fair market value of the property. An independent thirdparty appraisal performed by an appropriately qualified real estate appraiser must be obtained at time of repayment.

• Third party appraisals must be dated within 90 days of repayment of the incentive. The borrower will be responsible for obtaining and incurring all costs associated with the independent third-party appraisal.

• Where differing of opinions of value exist, the Program Administrator at its own cost, reserves the right to obtain a third-party appraisal to ensure the valuation reflects fair market value.

Contact Information