Are you a first-time buyer struggling to purchase a new home in Edmonton? Canada’s First-Time Home Buyer Incentive may help make homeownership more affordable.

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What Is the First-Time Home Buyer Incentive and How Does it Work?

Simply put, the First-Time Home Buyer Incentive helps first-time home buyers live more affordably by reducing their monthly mortgage payments. Without adding to their current debt load, first-time buyers can enter into a shared-equity mortgage with the Government of Canada, which will match the buyer’s initial minimum down payment by an additional 5 or 10% (10% applies to newly constructed homes, only).

In receiving the Incentive, first-time buyers may not need to save as much to make their mortgage payments more affordable over the long term. This is based on the basic mortgage principle that the more money you put down in advance, the smaller your mortgage (and the lower your monthly costs).

Check out: Simple Strategies to Help You Save For a Down Payment on a Home

What is a shared equity mortgage? 

shared equity mortgage allows you to apply for a smaller mortgage amount through your lender in exchange for an equity stake in your home.

In this instance, qualifying first-time Edmonton home buyers can borrow 5 or 10% of the home’s purchase price (on top of their regular down payment) from the Canadian government, allowing the government to share in the upside and downside of the property’s value. You are only required to repay the percentage borrowed when you sell or within 25 years (whichever comes first), keeping in mind you may repay more or less depending on the home’s fair market value during that period.

For example:

You’ve saved a 5% down payment for an Edmonton home priced at $400,000 (current average residential sale price in Edmonton) for a down payment total of $20,000. By moving ahead with the home’s purchase at the minimum 5%, your monthly payments would amount to $1,624. *

However, to reduce your mortgage costs, you receive an additional 5% via the First-Time Home Buyer Incentive for a total of 10% down, or $40,000. By putting more down, your monthly payments on the same home are reduced to $1,526 – a savings of almost $100 a month.

By receiving the 5% incentive, you agree to pay back 5% of the home’s value, regardless of whether it has increased or decreased. For instance, if your home’s value rises to $500,000, you will be required to pay back $25,000.

The same rules apply to Edmonton home buyers receiving a 10% incentive on a new construction home. Should the home appreciate, the buyer would repay 10% of the property’s fair market value at the time of repayment.

Are You Eligible For the First-Time Home Buyer Incentive? 

The First-Time Home Buyer Incentive is for first-time buyers only. You are considered a first-time home buyer based on any of the following:

1) You’ve never purchased a home before.

2) You haven’t lived in a home that either you or your spouse/common-law partner have owned in the last four years.

3) You’ve recently undergone a divorce or separation from your spouse or common-law partner (in this case, first-time buyer status applies even if you don’t meet the above requirements).

Additional Criteria

Even if you’re considered a first-time home buyer, there are additional criteria that need to be met to determine your eligibility for the First-Time Buyer Incentive. These include:

a) Both you and your partner are considered first-time home buyers

b) Your total annual income does not exceed a total of $120,000 (this includes your spouse or common-law partner’s income).

c) The amount you borrow is no more than four times your qualifying household income, to a maximum of $480,000.

d) You are a Canadian citizen, a permanent resident of Canada or a non-permanent resident with Canadian work authorization.

e) You have saved the minimum 5% down payment required to purchase a home via traditional means (savings, Registered Retirement Savings Plan, or a non-repayable financial gift from an immediate family member or relative).

Find out if you qualify for the First-Time Home Buyer Incentive by using the Eligibility and Savings Calculator.

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What Types of Homes Qualify For the First-Time Home Buyer Incentive? 

The Incentive can be applied to most home styles available on the Edmonton market, including:

Note: Qualifying residential units may also include triplexes and fourplexes

However, how much Incentive you’re eligible to receive may vary. For instance, existing homes (i.e., homes that have been previously lived in) and manufactured homes (both brand new and existing) are eligible for a maximum 5% incentive. On the other hand, brand new construction homes are eligible for either a 5 or 10% incentive.

See our previous post: Three Affordable Home Styles For First-Time Buyers

How to Apply For the First-Time Buyer Incentive 

After determining if you’re eligible for the Incentive based on the criteria above, the mortgage process is similar to that of a regular home purchase (with a few added steps):

1. Seek a mortgage pre-approval from a lender

2. Team up with an expert Edmonton REALTOR®

3. Find your new home

4. Fill out both the First-Time Home Buyer Information Package form and the Attestation and Consent Form and give them to your lender.

5. Once approved, you must activate your Incentive a minimum of two weeks before your closing date.

A Few Things to Consider 

  • You must have already saved the minimum 5% down payment.
  • The First Time Buyer Incentive is interest-free, and there are no pre-payment penalties.
  • The Incentive must be paid in full, either at the time of sale or after 25 years (no partial payments).
  • The government will share in any gains on your property’s fair market value.

Are you a first-time buyer looking to purchase a home in Edmonton or the surrounding area? We can help! Download your free copy of our first-time home buyer guide: A Step by Step Guide For Buying Your First Home, and don’t forget to check out our many other free first-time buyer resources, including: 


*Monthly mortgage payments based on current home prices, at a 1.74% 5-year fixed-interest rate over a 25-year amortization period.

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Posted by Terry Paranych on

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