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The federal government has discontinued the First-Time Home Buyer Incentive, a much-criticized program aimed at improving housing affordability for new buyers that saw muted uptake in major markets.

Canada Mortgage and Housing Corporation (CMHC), the national housing agency, said in a statement on its website that the program was winding up, with no new or updated submissions to be accepted after midnight ET on March 21.

Applications resubmitted after that date will be subject to a manual review, with review requests to be submitted no later than midnight ET on March 25 and no new approvals to be granted after March 31.

Introduced in 2019, the Incentive was aimed at reducing monthly mortgage payments for qualified first-time buyers through a shared-equity scheme. It offered a contribution of 5% or 10% towards the purchase of a newly constructed home, and 5% of the purchase of a resale existing home or new/resale mobile or manufactured home.

Still, that shared-equity component, which meant the government would also benefit from the potential future sale of a home, proved unpopular with buyers, who would have to repay the Incentive either after 25 years or upon sale.

The program faced challenges from the off. In 2020, federal Conservative MPs Tom Kmiec and Stphanie Kusie slammed its cost and low levels of consumer interest, urging CMHC to topdeo the scheme,  after an annual report showed its uptake lagged far below projections.

Mortgage Professionals Canada (MPC) also criticized the Incentive at its 2022 summit, when vice chair Veronica Love said the scheme was “simply failing” with data showing participation in the program was less than a third of what the government had originally envisaged.

Between its launch in September 2019 and the end of March 2021, the program had seen  LESS THAN 10,000 sucessfull applicants across Canada with Edmonton and Calgary accounting for nearly 2,000 of that total.

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Paying off your mortgage early - The Pros and Cons
 April 10 2024     Posted by John C Filice


Certainly! Paying off your mortgage early is a significant financial decision that many Canadians grapple with. It can be an appealing goal, offering both financial freedom and peace of mind. That said, it is essential for you to weigh the pros and cons before deciding to accelerate your mortgage payments.

Pros of Paying Off Your Mortgage Early

The most compelling advantage of paying off your mortgage early is the substantial savings on interest payments. Mortgages are typically large loans spread over many years, and interest can significantly increase the total amount you pay back. By shortening the loan period, you reduce the amount of interest accrued, potentially saving thousands of dollars.

Eliminating your mortgage payments can significantly reduce your monthly expenses, providing more flexibility in your budget. This freedom can allow you to redirect funds towards other investments, savings, or spending on personal or family needs without the burden of a large, recurring debt.

For many, owning their home outright offers a sense of security and achievement. It eliminates the worry of making large payments during financial downturns or unexpected life events, such as job loss or health issues.

Cons of Paying Off Your Mortgage Early

The funds used to pay off your mortgage early could potentially yield a higher return if invested elsewhere. One example is by purchasing stocks which has historically offered returns that outpace the interest rates of many mortgages. By focusing solely on mortgage repayment, you may miss out on more lucrative investment opportunities.

Investing extra funds into your mortgage means those funds are tied up in your home's equity. In case of financial emergencies, accessing this equity is not as straightforward as withdrawing money from a savings account or selling off other investments. This could pose a risk if you need quick access to cash.

In some scenarios, particularly in countries where mortgage interest is tax-deductible, paying off your mortgage early could mean losing a valuable tax deduction. While this is more relevant in the United States than in Canada, it's important for Canadians who own U.S. property or have other specific financial situations to consider this aspect.

Making the Decision

Deciding whether to pay off your mortgage early is a personal decision that depends on your financial situation, goals, and risk tolerance. It's essential to consider your overall financial plan, including retirement savings, emergency funds, and other debts. For some, the peace of mind and financial freedom of being mortgage-free are paramount. For others, maximizing investment returns and maintaining liquidity are more critical.

Before making any decisions, it might be beneficial to speak with a trusted financial advisor or a mortgage professional such as myself. They can help you assess your financial landscape, compare the potential returns of different strategies, and decide the best course of action for your specific circumstances.


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