As you all know, the Federal Government has a program to provide financial assistance to first-time buyers. That financial help is administered through Canada Mortgage and Housing Corporation (CMHC) and called the "First Time Home Buyer's Incentive" (FTHBI) program.

Briefly, the buyer applies for and is approved with a lender for a first mortgage. In conjunction with the first mortgage application, the buyer will work with their mortgage broker/lender and apply to CMHC to participate in the FTHBI. If successful, CMHC will lend the first-time buyer a portion of the purchase price. One interesting wrinkle is that apart from the standard practice of CMHC securing their loan by a second mortgage, CMHC is also an equity participant. See here for program details.

Here's the thing. The buyer is getting two mortgages, one from his first mortgage lender and a second mortgage from CMHC. We always hear about the first mortgage because we get official instructions from the lender. BUT, the CMHC second mortgage is invisible to us. It isn't typically referred to in the offer to purchase or real estate instructions, and buyers never tell us if they are participating in the CMHC program. 

We often don't hear about our buyers participating in the FTHBI program until very late in the closing process.

Last week our nervous buyer was desperate to know how much cash they have to bring in over and above their mortgage. Unaware that they were approved for the FTBHI, we gave our buyer a dollar figure of $10,000 more than they were planning on. They almost had a heart attack. Why was it so high? Because that extra $10,000 was coming from an FTHBI second mortgage which we did not know about!

Here's a team tip on how you can help us and your clients.

Give us an early heads-up if your client is participating in the FTHBI program. With your early advice, we can proactively search out the FTHBI second mortgage instructions/details instead of finding out at the last minute and stressing the heck out of our mutual clients. Then we can, early on in the process, work the second mortgage numbers into the financial calculations. 

Stress on all sides is avoided, and our buyer's home closing is smoothed out.

Protect yourself.

Cheers,

Barry