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Government Incentives for Home Buyers

 

Small or No Down Payment

Buyers now have the opportunity to put as little as 5% of the purchase price as a down payment. Buyers with good credit may also be able to qualify for $0 down. Terms and conditions apply so ask your agent or broker to see if you qualify.

Some important requirements are:

  1. You must purchase mortgage default insurance, which can be advanced as part of your loan.
  2. You are qualified for a mortgage with a five year term
  3. The property must be your principal residence (not an investment property)
  4. All normal CMHC (Canada Mortgage and Housing Corporation) guidelines with respect to income, down payment and credit still apply. Ask your agent or broker for more details.

 

Using RRSP Funds for a Down Payment

First time homebuyers, or those who have not owned a home as their primary residence in the last 5 years are permitted to use their RRSPs towards the down payment of their home. Income tax is not charged on these funds, provided that it is paid back within 15 years at an amount of not less than 1/15 per year. The maximum allowable withdrawal per person is $25,000. Think of this as a tax-free & interest-free loan to yourself! Terms and conditions apply so ask your agent or broker for details.

Exemption of Property Transfer Tax

 

Canadian citizens or permanents residents who have never owned property before anywhere in the world, may qualify for exemption from BC’s property transfer tax. To qualify, the applicant must have lived in BC for a minimum of 1 year, the purchase price must not exceed $425,000  ($425,000 - $450,000 proportional exemption). As always, other important terms and conditions do apply, so be sure to ask your broker or agent for all the details.

Purchase

 

Plus Improvements

This special program is designed for people who wish to purchase a home that may require some immediate upgrades… a new electrical service, a new roof, central air, a new furnace, new siding, eaves, doors, windows, a new kitchen, carpeting… or any other renovation that would increase the value of the home. (Please ask you lender for more details on how you would qualify and how this program can work for you.

 

Extended Amortization Periods

CMHC continues to be a leader in mortgage loan insurance product and service innovations that promote housing accessibility and choice for Canadians. CMHC’s extended amortization flexibilities provide Approved Lenders with the ability to better meet the needs of their customers and grow their business.

Borrowers benefit by having the ability to purchase their home and grow their equity sooner.

Terms and Conditions

Also refer to CMHC’s General Requirements (OPIMS 62136) and product specific requirements (e.g. Refinance, Portability)

CMHC provides mortgage loan insurance to CMHC Approved Lenders. Approved Lenders are responsible for all aspects of the mortgage loan insurance application.

The following table outlines the specific requirements for Mortgage Loan Insurance for Extended Amortization Periods. Enhancements to CMHC’s original announcement are highlighted in bold.

 

Available Amortization Periods

Up to 35 years

Premiums

Extended Amortization Surcharges

  1. Greater than 25 years, up to and including 30 year; 0.20%
  2. Greater than 30 years, up to and including 35 year: 0.40%

Note: Extended amortization provided under CMHC’s Affordable Housing Partnerships and Energy-Efficient Homes products are not subject to the premium surcharge.

Blended Amortization
Available under CMHC’s Refinance and Portability products subject to an additional 0.50% blending surcharge.

Eligible Loan Purposes

  1. Purchases including Flex down
  2. Refinance
  3. Portability

Terms and Conditions

This flexibility is not available width:

  1. Line of Credit
  2. Interest Only Mortgage Loan Insurance
  3. Chattel Loan Insurance
  4. Loans made On-Reserve secured by a Ministerial Loan Guarantee. Note: loans made under CMHC’s On-Reserve without a Ministerial Loan Guarantee pilot can be considered.

Qualifying the Borrower

  1. CMHC’s product specific borrower qualification criteria apply.
  2. Qualifying debt service ratios are calculated using the loan’s principal and interest payment based on the amortization period selected.

Processing

  1. Emili applications only.

 

Tips

 

Calculating the premium when blending the amortization period

With a refinance or portability transaction where a top up premium is being paid, the borrower can blend the remaining amortization on a previously insured loan with an amortization period of 30 or 35 years on the additional funds.

Premium Calculation

Lesser of:
(Premium on Increase to Loan Amount + extended amortization surcharge + blend surcharge) X increase to loan amount; or

(Premium on the Total Loan Amount + extended amortization surcharge) X total new insured loan amount

Reducing The Amortization Period When Refinancing Or Porting

 

Borrowers can reduce the amortization period for mortgage loans that were originally insured by CMHC with an extended amortization period. If the borrower selects and amortization period of 25 years or less on the top up portion of the funds, the amortization may be blended with the remaining amortization on the original CMHC insured loan without incurring a blending or extended amortization surcharge.

Flex Down

 

Flex Down provides borrowers with the opportunity to purchase their own home sooner by using a wider range of sources for a down payment. The Flex Down product complements CMHC’s existing 95% product. It is intended to appeal to homebuyers who may lack, or have made the financial decision not to provide, a traditional 5% down payment from their existing resources but who have a good credit history and sufficient income to support the financial obligations of homeownership.

Terms and Conditions

Also refer to CMHC’s General Requirements (OPIMS 62903).
Flex Down is available for purchase transactions with Loan-to-Value Ratios between 90.01% and 95%

  1. Wider range of equity sources.
  2. Borrowers are required to have a proven track record in meeting their debt requirements
  3. All borrowers must be on title to the property.
  4. Emili processing only.
  5. First mortgage only.
  6. Loans secured by a chattel mortgage or personal property security registration are not permitted (i.e. CMHC’s Chattel Loan Insurance product).
  7. Properties On-Reserve secured with a Ministerial Loan Guarantee are permitted (i.e. CMHC’s On-Reserve product). Flex Down is not available for On-Reserve Loans without a Ministerial Loan Guarantee.

Premium

2.9%

 

Sources of Equity

Permitted Sources


The minimum 5% down payment can come from any source, provided the funds are arm’s length and not tied to the purchase or sale of the property either directly or indirectly. Permitted sources are:
  1. Borrowed Funds*

Equity borrowed from any source that is arm’s length and not tied to the property purchase or sale transaction. This includes personal loans, lines of credit or credit cards. Payments on borrowed funds are included in the TDS calculation.

  1. Gifts*

Gifts or grants from any party that is arm’s length to the property purchase transaction.

  1. 100% Sweat Equity

From either the borrower or contributed by another party that is arm’s length to the property purchase transaction.

Lender Cash Back Incentives
- For CMHC Mortgage Loan Insurance purposes recovery of any lender cash back incentive must be done through the interest rate and not through a cash back repayment provision. If there are cash back repayment provisions these cannot be collected in higher or equal priority to the CMHC-insured mortgage loan out of any mortgage loan insurance enforcement proceeds. Any costs or losses associated with such cash back recoveries will be responsibility of the lender. As with all CMHC insured mortgage loans, penalties cannot be capitalized.

* Funds borrowed against proven assets and gifts from immediate relatives are acceptable as traditional down-payment sources and need not be submitted under the Flex Down product.

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