The Canadian federal and Ontario provincial governments introduced the Affordable Housing Program in 2005 to assist low and moderate income residents. There are four components to the AHP agreement: Rental and Supportive, Housing Allowance/Rent Supplement, Northern Housing and Homeownership.
For a first time home buyer, the Homeownership component is likely the most important. With this program, lower-income renters in the province of Ontario may apply to receive an interest free down payment loan to assist in purchasing a home.
An Interest Free Loan from the Canadian Government
According to the AHP, each region in Ontario is allocated a specific amount of funding in order to assist low to moderate income rental households in purchasing affordable homes using interest free down payment assistance loans.
It is the responsibility of each municipality within the province to determine the amount of the loan for each potential purchaser, in accordance with the program requirements.
Are You Eligible?
An applicant must be at least 18 years of age and have a maximum household income at or below the stated maximum eligible income limit for the particular area. The maximum household income is presently $75,800 under the program and is dependent on the specific municipality. Approved applicants can receive a loan up to $8,500 to be applied towards a down payment on the purchase price of an eligible home.
Equally important is that an applicant that alreadys owns a property, either solely or partly is not eligible for an interest free loan under the AHP Homeownership guidelines. This does not mean that you are uneligible if you previously owned a residence, only that you must not presently own one.
Type of Homes that you Can Buy
The home may be new or a resale. The home must have a selling price at or below the maximum selling pricing specified for the municipality. This ranges from $143,523 to a maximum of $389,600 and is updated quarterly based on recent resale prices. The property must be relatively modest in size and features, relative to community standards.
There must also be no conflict of interest relating to ownership of the home. In other words, an applicant or any member of the applicant’s family must not have an ownership interest in the property.
The AHP Homeownership Application
Suitable forms are available from the housing department of your municipality and must be submitted with required and complete documentation. You will require the following:
- AHP Homeownership Application form
- Photo Identification
- Proof of Household Income
- Agreement of Purchase and Sale
- Proof of Mortgage Approval by Primary Lending Institution
Note that the last point means that you must be able to secure mortgage financing through a lending institution before you submit your application.
Terms of the AHP Loan
An AHP loan is for a period of 20 years and no interest is charged on the loan. The property must remain the sole and principal resident of the applicant for the entire twenty year period. It may not be leased to any other party.
On the 20th anniversary date of the agreement, the loan is automatically forgiven, provided there has been no default under the terms of the loan. If the home is sold before the 20 year period is up, or the loan becomes in default, the amount of the assistance plus a percentage of any capital gain realized via the sale may be payable to the municipality.
If the property is sold for less than the purchase price, the down payment assistance would be waived if it is sold at fair market value and the sale is an arm’s length transaction.
The AHP loan can be repaid at anytime during the 20 year period. It is the responsibility of the owner to repay the loan in full in addition to a percentage of the appreciated value of the home based on current market values at that time.
The amount of the Homeownership loan provided by the AHP will be secured on title through an AHP mortgage and as stated, no interest is charged on it. On the closing date, the AHP loan is provided and put towards the down payment on the home.
If you are a Canadian resident and reside in the province of Ontario it is to your advantage to seek out this interest free loan. If you are a first time home buyer and meet the requirements, having an additional $8,500 to assist in your new home purchase can certainly be of benefit.
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