First-Time Home Buyer Incentive Program
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First-Time Home Buyer Incentive Program OPERATIONAL POLICY MANUAL A place to call home FIRST-TIME HOME BUYER INCENTIVE PROGRAM - OPERATIONAL POLICY MANUAL TABLE OF CONTENTS 1. Program Information ....................................................4 1.1. Contact Information ...........................................................4 2. Introduction.............................................................5 3. General Incentive Criteria ................................................5 3.1. Mortgage Loan Insurance Requirement ..........................................5 3.2. Loan to Value (LTV) Requirement ................................................5 3.3. Mortgage Loan Insurance Premiums.............................................5 3.4. Incentive Amount (%) ..........................................................5 3.5. Maximum Incentive Amount (%).................................................5 3.6. Maximum Closing Date ........................................................6 3.7. Incentive Term................................................................6 3.8. Incentive Loan Security ........................................................6 3.9. Purchase Plus Improvements ...................................................6 4. Borrower Eligibility and Qualification Criteria................................7 4.1. First-Time Homebuyer .........................................................7 4.2. Maximum Number of Incentives per Borrower/Co-borrower/Guarantor ..............7 4.3. Equity .......................................................................7 4.4. Income ......................................................................7 4.5. Mortgage to Income (MTI) Ratio .................................................8 4.6. Debt Service Ratios............................................................8 5. Property Eligibility .......................................................9 5.1. Occupancy ...................................................................9 5.2. Location .....................................................................9 5.3. Property Insurance ............................................................9 6. Incentive Application Process..............................................9 6.1. Application Submission ........................................................9 6.2. Cancellations .................................................................9 6.3. Post Approval Changes ........................................................10 6.4. Incentive Closing Instructions ...................................................10 6.5. Incentive Advancing ...........................................................10 6.6. Closing Costs . .10 6.7. Minimum Documentation and Retention Requirements ............................10 2 FIRST-TIME HOME BUYER INCENTIVE PROGRAM - OPERATIONAL POLICY MANUAL 7. Loan Administration .....................................................11 7.1. Mortgage Assumption, Release and/or Replacement of Covenant....................11 7.2. Dissolution of Relationship/Buyout of Co-Borrower’s Interest in the Property..........11 7.3. Substitution of Security (Portability)..............................................11 7.4. Partial Release of Security ......................................................11 7.5. Change in Intended Use of the Property – Occupancy ..............................12 7.6. Change in Intended Use of the Property – Commercial Use .........................12 7.7. Change in Lender of First Ranking Mortgage (i.e. Switch from one Lender to another) ..12 7.8. Refinances ...................................................................12 7.9. Incentive Repayment ..........................................................13 7.10. Property Valuation at the Time of Incentive Repayment ...........................13 7.11. Postponement/Subordination Requests.........................................14 7.12. Approval of Sale by the Program Administrator ..................................14 8. Default Management .....................................................14 8.1. Events of Default..............................................................14 8.2. Situations of Hardship .........................................................14 8.3. Incentive Recovery ............................................................14 Appendix A: Terms of Reference for Appraisers ................................15 A printed copy of this document may not be the most up-to-date version. For the most recent version, refer to: placetocallhome.ca 3 FIRST-TIME HOME BUYER INCENTIVE PROGRAM - OPERATIONAL POLICY MANUAL 1. PROGRAM INFORMATION To help make homeownership more affordable for first-time homebuyers, Budget 2019 introduced Canada’s First-Time Home Buyer Incentive (FTHBI) Program. The FTHBI Program 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. For the purchase of an existing home or a mobile/manufactured home (new or existing), an Incentive amount of 5% is available. For the purchase of a newly constructed home, an Incentive amount of 5% or 10% is available to qualified buyers. The Incentive enables 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 downside of the value at time of repayment. The Incentive is repayable at the earlier of 25 years or the sale of the property. The homebuyer can also repay the Incentive in full at any time, without a pre-payment penalty. Through the FTHBI Program, Canada Mortgage and Housing Corporation (CMHC) as “Program Administrator” will provide up to $1.25 billion over three years (starting in 2019–20) to eligible homebuyers by sharing in the cost of a mortgage. Incentive applications will be eligible for submission beginning on September 2, 2019 with closing dates taking effect on or after November 1, 2019. Incentive applications will be approved on a first come first serve basis. The FTHBI Program is subject to annual budget allocations over the three-year period (ending in 2021-22). This program cannot be applied retroactively for borrowers who have already purchased and closed on a property prior to November 1, 2019. 1.1. Contact Information National Housing Strategy Website: placetocallhome.ca The First-Time Home Buyer Incentive Contact Number: 1-(877)-884-2642 First Canadian Title, funding provider acting on behalf of the Program Administrator 1-(833)-974-0963 4 FIRST-TIME HOME BUYER INCENTIVE PROGRAM - OPERATIONAL POLICY MANUAL 2. INTRODUCTION This document (“First-Time Home Buyer Incentive Program: Operational Policy Manual”) represents the operational policy requirements for the FTHBI Program. With respect to mortgage loan insurance applications, standard Approved Lender and Mortgage Loan Insurer policies and guidelines apply unless otherwise noted/clarified within this document and/or within the terms, conditions and applicable documents of the FTHBI Program. In the case of a discrepancy between this document and the Shared Equity Mortgage, the Shared Equity Mortgage shall prevail. 3. GENERAL INCENTIVE CRITERIA 3.1. Mortgage Loan Insurance Requirement The first mortgage must be eligible for mortgage loan insurance through either Canada Guaranty, CMHC or Genworth. 3.2. Loan to Value (LTV) Requirement The LTV must be greater than 80% at the time of the Incentive approval. The LTV ratio is calculated based on the first mortgage only. For clarity, the first mortgage is based on the lending value* less the 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. 3.3. Mortgage Loan Insurance Premiums The Premium* is based on the LTV ratio taking into account the first mortgage only. 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. 3.4. Incentive Amount (%) Property Type Incentive (%) Existing Home 5% New Construction 5% or 10% Existing or New Construction Mobile/Manufactured Home 5% The 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. 3.5. 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%. 5 FIRST-TIME HOME BUYER INCENTIVE PROGRAM - OPERATIONAL POLICY MANUAL In order to maintain the LTV requirement of the FTHBI Program (must be greater than 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. 3.6. Maximum Closing Date The maximum closing date for an existing home is 6 months from time of application approval. The maximum closing date for new construction is 18 months from time of application approval. For clarity, the application approval