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Smarter Mortgages
What the 2019 Federal Budget Changes Mean for First-Time Homebuyers in Canada
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Buying your first home is never easy — especially with prices rising across the country. That’s why every bit of government support can make a meaningful difference. In 2019, the Canadian federal government introduced two key updates in its budget aimed at helping first-time homebuyers:
- A major boost to the Home Buyers’ Plan (HBP)
- A brand-new initiative called the First-Time Home Buyer Incentive (FTHBI)
If you’re just starting to think about homeownership, these programs can reduce your upfront costs and make monthly payments more manageable. Let’s break it all down in simple terms.
📊 Comparison of Home Buying Costs – With vs Without 2019 Incentive
| 🏷️ Item | Without Incentive | With 5% CMHC Incentive |
|---|---|---|
| 🏠 Purchase Price | $400,000 | $400,000 |
| 💰 Down Payment (5%) | $20,000 | $20,000 |
| 🏦 CMHC Incentive | N/A | $20,000 (5%) |
| 🧾 CMHC Insurance Premium | $15,200 | $11,160 |
| 💳 Mortgage Amount | $395,200 | $371,160 |
| 📆 Monthly Payment (@3.14%) | $1,899 | $1,783 |
| 📉 Lifetime Payment Savings (25 years) | ~ $34,800 | |
📌 Note: Based on a sample $400,000 home and today’s best 5-year fixed rate of 3.14%. Actual savings will vary by lender, rate, and province.
What Changed With the Home Buyers’ Plan (HBP)?
Before 2019, you could withdraw up to $25,000 from your RRSP tax-free to use as a down payment on your first home. That limit was increased to $35,000, giving first-time buyers more flexibility to tap into their savings without being penalized.
Even more inclusive, the program now allows individuals going through a divorce or separation to qualify — even if they’ve already owned a home in the past. That means people experiencing life transitions aren’t automatically disqualified from using the program.
🧠 Mini Takeaway: If you’re buying solo post-divorce or combining finances with a new partner, you may now be eligible for a tax-free RRSP withdrawal to help fund your down payment.
When Did the HBP Changes Take Effect?
These changes took effect immediately after the federal budget release — meaning March 19, 2019 was the first date eligible withdrawals could be made under the new $35,000 limit.
What is the First-Time Home Buyer Incentive (FTHBI)?
This was the major headline of the 2019 budget. Under this program, Canada Mortgage and Housing Corporation (CMHC) helps cover part of your home’s purchase price. Think of it as an interest-free loan that you don’t have to repay monthly.
Here’s how it works:
- For existing homes, CMHC contributes 5% of the purchase price.
- For newly built homes, CMHC offers 10% to encourage new construction.
You don’t pay monthly interest or principal on this amount — but when you sell or after 25 years, you must repay the same percentage (5% or 10%) of your home’s fair market value at that time.
🏡 How the First-Time Home Buyer Incentive Works
-
🎯 Step 1: Apply with a Participating Lender
When getting pre-approved for a mortgage, ask your lender or broker if you qualify for the incentive program through CMHC. -
💰 Step 2: Receive 5% or 10% Contribution
CMHC will contribute:- ✅ 5% of the home price for resale homes
- 🏗️ 10% of the home price for new constructions
-
📉 Step 3: Lower Mortgage & Monthly Payments
Because the CMHC covers a portion of the price, your mortgage amount is reduced — resulting in smaller monthly payments and less interest over time. -
⏳ Step 4: No Monthly Repayments
You don’t repay the incentive monthly. Instead, CMHC holds a shared equity stake in your home. -
🔁 Step 5: Repayment Happens Later
Repay the same % (5% or 10%) of your home’s current value:- 🕓 When you sell the property
- 🏦 Or after 25 years (whichever comes first)
-
💡 Optional: Early Repayment
You can repay the incentive in full anytime — with no prepayment penalty.
📌 Example: If you received 10% on a $400,000 new build, and later sell for $500,000 — you’ll repay $50,000 to CMHC.
Let’s Talk Numbers
Let’s say you’re buying a $400,000 home with the minimum 5% down:
Without the Incentive:
- Down payment: $20,000
- CMHC insurance: $15,200
- Mortgage amount: $395,200
- Monthly payment @ 3.14%: $1,899
With the Incentive (5% on Resale Home):
- Down payment: $20,000
- CMHC contribution: $20,000
- CMHC insurance: $11,160
- Mortgage amount: $371,160
- Monthly payment @ 3.14%: $1,783
💡 Lifetime savings in interest and payments? Roughly $34,800 over 25 years — not bad!
📉 Monthly Payment Comparison – FTHBI vs Traditional 5% Down
| 🏷️ Scenario | Mortgage Amount | CMHC Insurance | Monthly Payment (@3.14%) |
|---|---|---|---|
| Traditional 5% Down | $395,200 | $15,200 | $1,899 |
| With FTHBI (5% CMHC Share) | $371,160 | $11,160 | $1,783 |
| 💡 Monthly Savings | $116 per month | ||
📌 Note: Based on a $400,000 home purchase and 25-year amortization at a 3.14% fixed rate. Actual rates and premiums may vary.
Who Qualifies for the First-Time Home Buyer Incentive?
You’ll need to meet these basic requirements:
- Your household income must be $120,000 or less
- You need at least a 5% down payment
- Your mortgage can’t exceed 4x your total household income (i.e. max $480,000 mortgage)
That typically caps your home budget around $500,000 to $600,000, depending on your financial situation and property location.
✅ FTHBI Eligibility Checklist – 2025 Guidelines
| 📋 Requirement | Eligibility Rule | Explanation |
|---|---|---|
| 👨👩👧👦 Household Income | ≤ $120,000 | Combined gross income of all borrowers must not exceed $120K |
| 💵 Minimum Down Payment | 5% of purchase price | Same as required for any CMHC-insured mortgage |
| 🏡 Maximum Mortgage Size | 4× annual income | Mortgage must not exceed $480,000 (if income = $120,000) |
| 📦 Property Type | New or resale home | Both resale and new construction qualify |
| 🏠 Property Must Be | Owner-occupied | Incentive not available for rental or investment properties |
📌 Tip: Use this checklist before applying for the First-Time Home Buyer Incentive to see if you qualify.
Too Good to Be True? Here’s the Catch
Yes, it’s interest-free, and no monthly payments are required. But this isn’t a gift — it’s an equity stake.
If your home value goes up, you’ll owe CMHC more than they gave you — the same percentage of the increased value. For example, if they gave you 10% of $400,000 (i.e. $40,000), and your home later sells for $600,000, you’ll need to repay $60,000.
That’s not necessarily a bad deal — you’ve had access to a bigger home or lower payments for years — but it’s important to plan for it.
🔁 Example of FTHBI Repayment on Home Sale or Refinance
Here’s what repayment might look like under two different scenarios — one where the property value goes up, and one where it goes down.
📈 Scenario A: Property Value Increases
- Original Home Value: $400,000
- CMHC Incentive Received (5%): $20,000
- Home Sells for: $500,000
- Repayment Owed to CMHC: 5% of $500,000 = $25,000
💡 You repay more than you received, since your home appreciated in value.
📉 Scenario B: Property Value Decreases
- Original Home Value: $400,000
- CMHC Incentive Received (5%): $20,000
- Home Sells for: $350,000
- Repayment Owed to CMHC: 5% of $350,000 = $17,500
💡 You repay less than you received, because the home lost value.
📌 Note: Repayment is always based on your home’s market value at the time of sale or refinance — not the original loan amount.
When Did This Program Start?
The First-Time Home Buyer Incentive officially launched in September 2019, and applications have been accepted since then via your mortgage broker or lender. The incentive can be repaid anytime without penalty — either during the mortgage term or upon sale/refinance.
Final Thoughts: Should You Use the 2019 Incentives?
If you’re a first-time homebuyer in Canada, the 2019 federal budget made it easier to enter the market — especially if you have modest income and limited savings.
The updated HBP gives you more tax-free funds to use for your down payment. The CMHC incentive lowers your mortgage amount and monthly payments — without adding monthly repayment obligations.
However, you’re giving up a small portion of your home’s future value. It’s a trade-off — short-term affordability for a future payback.
👉 Tip: Use the incentive only if you need it to qualify for a better home or lower your monthly payment to something more sustainable.
📞 Talk to a Mortgage Expert
Wondering if you qualify for the First-Time Home Buyer Incentive? Get personalized advice on your eligibility for the 5–10% CMHC contribution — no pressure, no obligations.
✅ See If You Qualify Now
