Feds Pull the Plug on the Place You Could Call Home

Feds Pull the Plug on the Place You Could Call Home

Canada Mortgage and Housing Corporation (CMHC) has discontinued its First-Time Home Buyer Incentive (FTHBI) program. The program was designed to assist new buyers entering the housing market but has received mixed reviews since its inception. 

The National Housing Strategy’s aptly selected URL is aplacetocallhome.ca, from which the FTHBI was hatched. Ironically, the federal government has decided to shutter the program as homeownership rates drop due to housing affordability and availability being at all-time lows. 

End of Publicly Funded Downpayments

The FTHBI program, designed to lower monthly mortgage costs for first-time homebuyers by allowing the government to share equity in the home’s purchase through an additional downpayment, is now officially over. The deadline for new or resubmitted applications to the program is set to end March 21, 2024. This announcement came as a surprise, leaving many sidelined millennials disappointed as they waited for a more opportune time to purchase their first home. 

Restrictive Shortcomings

The FTHBI was not without its critics. Many felt the program was restrictive and unhelpful, with eligibility issues including household income limits and the mortgage size the buyer could take on. These restrictions resulted in only a small pool of applicants being eligible for the program.

Strangely, some Canadians wonder if the government chose to end the program due to its losses in the equity positions taken so far. Or that most first-time homebuyers (FTHB) in Canada live in cities where the restrictively low $480,000 (or even the higher $675,000 in Toronto or Vancouver) purchase price is not feasible to buy anything after stress-testing the mortgage on current mortgage rates with as little as 5% or 10% downpayment. 

Always a Prospective Homebuyer, Never a Homeowner

With the discontinuation of the FTHBI, prospective homebuyers may face additional challenges when trying to enter the housing market. Under the program, you could borrow as much as 10% of your purchase price, which would be used for a more significant downpayment, reducing your monthly payments. Without this assistance, many first-time buyers may struggle to afford the initial costs of purchasing a home. Of course, that is if they could qualify for a mortgage on a home they want, located where they want to live.

Last Door to Close

The end of the FTHBI could lead to higher monthly payments for homeowners who would have relied on the program to lower their initial mortgage balance. The program allowed homeowners to pay the incentive back after 25 years or at the time of the property’s sale, with the amount owed adjusted to reflect the property’s appreciation. Without utilizing the FTHBI, homeowners may need to seek alternative methods to manage their mortgage payments.

The termination of the FTHBI marks a significant shift in the Canadian housing landscape. While the program had its critics, it also provided a valuable resource for some first-time homebuyers. As we progress, it will be interesting to see what new initiatives are introduced to assist those looking to enter the housing market. For now, prospective homebuyers will need to navigate the housing market without the assistance of the FTHBI.

Ready to move forward with your purchase, with or without the FTHBI? Contact nesto’s mortgage experts to find your path to homeownership.