A major item from this week’s federal budget is the first-time home buyer incentive. 

Under the plan, the government will advance up to 10 per cent of the purchase price of a home so first-time buyers can take out a smaller mortgage and keep monthly payments lower.

Here are the five main things you need to know about this bold incentive:

1. Buyers must make a down payment of at least five per cent but less than 20 per cent. And they must have a household income below $120,000 a year.
2. The amount of the insured mortgage plus the CMHC incentive is capped at four times the home buyer’s combined annual income, or up to $480,000.
3. The CMHC will provide up to $1.25 billion in incentives over three years starting in September. Buyers of newly-constructed homes will get 10 per cent of the home price, while those purchasing an existing property will get five per cent.
4. Home buyers must repay the CMHC, either when the home is sold or sooner.
5. The federal government plans to raise the amount first-time buyers can pull from their RRSP to fund the purchase of their home, $35,000, up from $25,000. Changes are also being planned to allow people dealing with the break-up of a marriage or common-law partnership to dip into those savings a second time.

What are your thoughts on this incentive? Let us know in the comments below.